Year End Results

RNS Number : 9841H

Lonrho PLC

03 March 2010

 

 

3rd March 2010

 

 

Lonrho Plc

 

("Lonrho" or the "Company")

 

Results for the year ended 30 September 2009

 

Lonrho (AIM: LONR), the conglomerate with a structured portfolio of African investments, is pleased to publish its audited results for the year ended 30 September 2009. These are in line with the quarterly report and trading update released on 9th November.

 

Lonrho has continued to develop its investments in infrastructure, transport, agribusiness, hotels and support services.

 

Financial Review

 

The financial results remain in line with the Company's expectations. The year has been pivotal in demonstrating the effectiveness of Lonrho's investment strategy, with all of the Companies operating businesses contributing towards a considerable increase in Lonrho's turnover and profitability

 

·; Turnover increased by 111% to £90.9m (up from £43.1m in 2008)

 

·; Net assets increased by 16.4% to £81.1m (up from £ 69.7m in 2008)

 

·; Loss before tax reduced to £4.5m from £38.7m in 2008

 

 

David Lenigas, Executive Chairman of Lonrho commented:

 

"I am delighted that the Lonrho management teams have demonstrated significant progress delivering real growth and strong tangible businesses on the ground. Turnover for the year has risen to £90.9m and each established operating business is cash positive. Lonrho has produced EBITDA positive results for the year proving that the Company has delivered on its commitments.

 

The solid foundations that are now in place across all five divisions, in seventeen countries, provide the building blocks for further development and profitable growth this year. Lonrho has minimal debt and with these impressive full year results, each of the divisions is in a good position to raise local debt to help fund further expansion.

 

The future African economy is being driven by oil, mineral resources and agriculture. Lonrho is ideally placed to participate in and benefit from these specific market opportunities across the continent."

 

LONRHO ENQUIRIES

 

Lonrho Plc	+44 (0)20 7016 5105
David Lenigas, Executive Chairman	+44 (0)7881 825 378
Geoffrey White, Chief Executive Officer	+44 (0)7717 307 308
David Armstrong, Finance Director	+44 (0)7833 054 693
Pelham Bell Pottinger
Charles Vivian	+44 (0) 20 7337 1538
	+44 (0) 7977 297903
James MacFarlane	+44 (0) 20 7337 1527 +44 (0) 7841 672 831
Beaumont Cornish Limited (Nomad)
Rosalind Hill Abrahams	+44 (0) 20 7628 3396
Roland Cornish	+44 (0) 20 7628 3396

 

Statutory accounts

 

The financial information set out in this announcement does not constitute the company's statutory accounts for the years ended 30 September 2009 or 2008. The financial information for the year ended 30 September 2008 is derived from the statutory accounts for that year. The audit of the statutory accounts for the year ended 30 September 2009 is complete. The auditors reported on those accounts; their report was unqualified and did not include references to any matters to which the auditors drew attention to by way of emphasis without qualifying their report.

 

The full annual report and financial statements are published on its web site (www.lonrho.com) today and are being posted to shareholders.

 

Chairman's Statement

David Lenigas

Executive Chairman

2nd March 2010

 

Lonrho has had an excellent twelve months in business. Against the background of the year's global economic turmoil, the Company has grown its operations, improved profitability in its established businesses, enhanced management and systems and has entered 2010 in a very strong position. The Company has little debt, strong cash flow from operational businesses, and is well positioned to grow turnover and profits in its core businesses in 2010.

 

It is widely accepted that the emerging African markets are taking on global significance. With nearly a billion consumers, increasing political stability, rising disposable incomes and unique resources Africa is a Continent whose time has come and that will deliver strong growth over the coming decades.

 

Gross Domestic Product in Sub Saharan Africa (SSA) is forecast to grow at 7% in 2010 (International Monetary Fund) and this growth is expected to continue as the emerging economies of the region develop.

 

Lonrho's strategy is to provide the services and industries that emergent Africa requires and, implicit in that, to assist the development of the Continent. The Company's heritage of over one hundred years of building businesses in Africa is unique.

 

The strength of the brand across the Continent, in all aspects of our business, adds tangible commercial value to our operations.

 

Lonrho's five operational divisions operate in seventeen countries and are focused on supporting and servicing the three industries that are driving the economic growth across SSA. These are:

 

Oil Agriculture Minerals

 

The African oil and gas industry is having a huge impact on the economies of the established producing countries. Angola (the 2009 OPEC Chairman) is producing 2 million barrels per day, overtaking Nigeria as the Continent's largest producer and Equatorial Guinea, which produces 450,000 barrels per day. New finds in Uganda, Ghana, Cote D'Ivoire and along the east coast are generating real economic growth opportunities. Currently Africa supplies 16% of USA oil and this will grow over the coming few years to 25%. Likewise, China has developed significant off-take agreements across the Continent to fuel its burgeoning economic expansion and, in return, African infrastructure is benefiting from massive Chinese investment. Lonrho is deeply involved in providing support for the oil sector across the Continent as it develops through projects such as our oil services port, Luba Freeport, serving West Africa.

 

In agriculture, the macro forecasts for global production indicate that not only does African agriculture have significant potential but, importantly, that the World will actually rely on agricultural production from Africa to meet demand over the coming decade. This is coupled with a growing domestic market, approaching one billion people that need to be fed on the Continent itself. Lonrho is a leading player in this market, stimulating and managing production, distributing agricultural equipment and vertically integrating agricultural logistics to take African produce from the grower to the consumer, both within Africa and in Europe, the Middle East and Scandinavia.

 

The mineral wealth of Africa is well documented. With the growing political stability across the Continent and the benefit of significant and growing foreign direct investment, the mineral wealth of Africa is finally being realised. Lonrho provides schools, hotels, transport, water, workers camps and logistic services to the mining industry.

 

The multiplier effect of foreign direct investment and the development of each new project in these three strategic industries stimulates growth and development. Each investment benefits the surrounding economy creating employment and in turn subsidiary investment opportunities and thus provides regional socio-economic benefits, increasing the affluence of the market and the number of consumers within Africa.

 

Africa is a phenomenally strong emerging market driven at the most basic level by the World's oil, agricultural and mineral requirements, which continue to see growing demand.

 

 

Chief Executive's Review

 

Geoffrey White

Director & Chief Executive Officer

2nd March 2010

 

During the year to 30th September 2009 Lonrho has successfully grown and developed. The Company has delivered on its short term objective of establishing a series of five core business sectors that provide the fundamental building blocks from which the Company can grow and expand.

 

Financial Highlights of the 2008 / 2009 financial year are:

 

·; Turnover for the financial year increased 266% on a like for like basis and by 111% on a reported basis against the previous year

 

·; 16.4% growth in net assets year on year from £69.7 million to £81.1 million

 

·; Loss before tax reduced from £38.7 million to £4.5 million

 

In 2006 Lonrho was set a mandate by its institutional shareholders to build a conglomerate focused solely on the emerging African market. The subsequent three years have seen the Company define a clear and deliberate strategy focused on five key business sectors. The Company has now invested in and delivered the essential foundations of the businesses in each sector, namely:

Agribusiness Infrastructure Hotels Transport Support Services

 

The businesses have proven they are viable and sound investments and importantly all the established operating businesses are cash positive. In addition the Company continues to invest in the rollout of its existing businesses into new markets.

 

Following the fundraising in December 2009, the Company enters 2010 in a strong position. Lonrho has little debt, significant cash at bank, a well understood commercial strategy, quality management teams in place and each divisional operation is tried and tested. A notable achievement in three years.

 

The corporate agenda is now to utilise these solid building blocks to replicate, grow and support the Company's divisions across the Continent, utilising the management skills, experience and proven results of current operations to expand into new countries where equivalent markets are available.

 

Lonrho has developed its business divisions to be aligned with the oil, agriculture and mineral industry sectors and to work with these expanding industries both from an operational perspective and from a service industry perspective. As the oil, agriculture and mineral industries grow across the Continent, Lonrho's market for supporting these industries expands.

 

As a result of its focus on the oil, agriculture and mineral industries, Lonrho operations are inevitably focused on the African countries that are seeing the strongest economic growth and development, such as Angola, Equatorial Guinea and Mozambique.

 

Emerging markets are inherently risky and it is incumbent on the Company to best manage risk. Lonrho has structured its operations so as to mitigate both political risk and commercial risk as much as possible, thus providing a sound platform for investors to approach Africa.

 

Lonrho operates its businesses across seventeen countries in Sub Saharan Africa, thus mitigating political risk and exposure to any single country, and divides its corporate activities into five core divisions, each division a standalone entity with no recourse to other divisions, thus significantly reducing commercial risk. This structure reduces investment risk in Africa whilst providing unrestricted access to this exciting emerging market.

 

Agribusiness

 

·; African agricultural output is growing significantly, driven by the growth in domestic consumption and the expanding requirement for African produce to be supplied into the global market.

 

·; Rollex (51% holding), continues to be the central platform within Lonrho's Agribusiness division and year on year sales have risen 49%. The Rollex strategic focus remains the vertical integration of the agriculture market, taking African produce, processing and packaging it and delivering it to both local and international markets including Europe, the Middle East and Scandinavia. The division benefits from the continued development of agriculture for local and export markets in Africa and the growing requirement to deliver production from farm to consumer across the Continent. This market sector provides a service that is growing in demand as African producers increase output and also provides better margins than straight farming operations.

 

·; Rollex processes and packs fruit, vegetables, meat and fish for its clients, which include leading retailers Shoprite, Woolworths, Pick n Pay and Spar in Southern Africa as well as exporting to Tesco, Sainsburys, Marks & Spencer, Spinneys and others globally.

 

·; Rollex Freight and Rollex Cargo continue to grow their businesses maximising the back-load efficiencies for the trucking fleet used for collecting agricultural produce across Southern Africa.

 

·; Building work continues on the John Deere distributorship for Angola (51% holding) located in Catete, in the Bengo Province. John Deere Angola exhibited at the Angolan National Agricultural Fair (FILPA) on the 14 July 2009. The Lonrho John Deere stand attracted great interest and significant sales enquiries and firm orders were received. Agricultural redevelopment remains a primary Angolan Government objective. The Government has announced that it intends to invest US$2 billion (£1.2 billion) in rebuilding Angolan agriculture of which a reported US$350 million (£220 million) of financial incentives is being made available to indigenous farmers to purchase agricultural equipment.

 

Infrastructure

·; Luba Freeport (63% holding), the Lonrho oil services terminal in the Gulf of Guinea, is unique in West Africa in that it is a natural deep water port situated in a large secluded bay providing depths of up to 45 metres. Luba is, importantly, surrounded by open land. This allows it to have room for expansion, in contrast to most African ports which are 'city locked' and have no further land available. Luba is Lonrho's largest single asset.

·; Noble Energy has committed to utilise the port as a central operational base for its Gulf of Guinea operations. Noble is expected to develop into a further major client for Luba, joining the extensive list of world class tenants already established at the port, including companies such as ExxonMobil, Baker Hughes, Schlumberger, Hess, M-I SWACO and SBM.

·; Revenue at Luba has increased by 9% against the previous year. The activity for the first half is showing strong signs of growth with new drilling programs being initiated off-shore by several existing Luba tenants and general oil industry confidence in the Gulf of Guinea is clearly growing.

 

·; A new container scanner for the port has been purchased and is due to arrive and be installed in early 2010. Once operational, the scanner will provide the premier container scanner security service in Equatorial Guinea and will be a major asset for the port.

 

·; Kwikbuild Corporation Limited (70% holding) and its South African subsidiary E-Kwikbuild (52% holding) provides prefabricated building solutions for Africa. These include houses, schools, clinics, offices and workers' camps for the mining and oil industry. E-Kwikbuild is a Black Empowerment Enterprise company.

 

·; The elections in South Africa this year led to a decrease in the number of tenders that were issued as Government contracts. Since the year end there has been a four-fold increase in the number of projects released for tender by the South African Government. Kwikbuild has reacted to the opportunity created by the upsurge in the tender process and has tendered for significant potential volumes.

 

·; Historically, E-Kwikbuild wins circa 40% of the tender applications that it submits and, following the commissioning of a new production plant during the year, has started to increase focus on export markets across the Continent, including Tanzania, Kenya, Ghana, Angola, Mozambique, Uganda and the DRC.

 

 

Hotels

 

·; Hotel Cardoso in Mozambique (59% holding + Management Contract) has seen average occupancy levels of close to 80% during the year and the hotel is achieving an average room rate of over US$100 per night. The refurbishment of the rooms, conference facilities and restaurant with its new terrace overlooking the bay and the redevelopment of the park adjacent to the hotel, including the new playground and coffee shop, have firmly re-established Hotel Cardoso at the premier end of the Maputo hotel market.

 

·; The Grand Karavia Hotel in Lubumbashi, DRC (50% holding + Management Contract) continues with its US$20million (£12 million) refurbishment. The hotel will provide the only international standard accommodation in Lubumbashi, the centre of the burgeoning copper belt of the DRC. The recovery of the copper sector in Lubumbashi continues and demand for hotel rooms is expected to be strong when it opens in 2010. The executive management team joined the company as from the 1st October 2009 as planned and are implementing the pre-opening program.

 

Transport

 

·; Lonrho's pan African regional aviation business, Fly540, has continued to expand its network and build on its reputation for reliability, safety and punctuality. Fly540 remains focused on delivering the first international standard regional African airline that services two key markets; regional distribution for intercontinental carriers flying into Africa and the ability for passengers in Africa to travel North to South and East to West across the Continent.

 

·; The East Africa hub is now fully operational based out of Nairobi serving Kenya, Uganda, Tanzania, Southern Sudan and Burundi. Carrying 215,735 (2008: 171,160) passengers in 2009 the airline is operating to plan and continues to build new routes as it grows.

 

·; Fly540 Angola (60% holding) continues to work with the Angolan Civil Aviation Authority to convert the Air Services Licence (ASL), received in July 2008, to the Air Operators Certificate (AOC) necessary to permit flight operations to commence. It is expected that flight operations will commence in the next two months.

·; Initial destinations for Fly540 Angola will include the major centres of Cabinda, Luanda, Soyo, Benguela, Huambo, and Malanje and thereafter will grow to fifteen domestic destinations. Operations are centred out of Cabinda (the centre of the oil industry) and Luanda. Lonrho plans to initially deploy a new ATR72 aircraft to Angola to establish the primary routes and further aircraft as the operation grows. The Company is in the process of concluding the necessary financing arrangements.

·; Fly540 Ghana (60% holding) has been awarded an ASL by the Ghana Civil Aviation Authority and is rapidly finalising the process to convert this to an AOC. Flight operations are expected to commence during the first half of 2010.

·; Fly540 Zimbabwe (a LonZim company) plans to commence operations in 2010.

Support Services

 

·; Bytes & Pieces (65% holding) is the market leader in the IT sector in Mozambique and continues to grow as a result of expanding business to existing clients as the market benefits from the continued economic growth of Mozambique.

 

·; Lonrho IT (CES, 50% holding + Board control) continues to grow its operations across Southern Africa. In South Africa the Johannesburg and Nelspruit offices continue to expand.

 

·; CES Zambia (45% holding+ Board control) started trading in quarter three of the financial year and is already on track to achieve US$1m turnover in the first 12 months of operation.

 

·; Lonrho Water focuses on two strategic sectors, water bottling for domestic consumption and water purification plants. On the bottling side, the company continues operating in Mozambique and DRC, and is constructing a 4 million litre per month plant in Angola to serve the Luanda market. The water purification plants are scaleable units designed into 40ft containers that are applicable to rural communities, corporations, municipalities and industrial or domestic use where there is a requirement for potable standard water from a local source.

 

LonZim Plc

 

·; LonZim Plc (LonZim), in which Lonrho currently has a 24.61% shareholding and a management contract, has built a business portfolio that consists of eight businesses centred on the hotel, IT, real estate, security printing logistics and distribution sectors.

·; LonZim reported on 15 October 2009 that the portfolio of businesses acquired over the past two years reflected (at acquisition cost) that LonZim's market capitalisation represented a 62% discount to the cost of the businesses acquired. Asset value per share was stated as 101.6p. Profit before tax for the year to 31 August 2009 was £0.9million.

Financing Activities

·; Lonrho announced on 11 November 2008 that it had raised £15.6m for the completion of its existing capital and development programs. On 11 August 2009, the Company announced that it had raised £2.5m to complete the acquisition agreement in relation to Rollex Pty.

·; Post year end, on 9 December 2009, Lonrho announced that it had raised £25.1m to increase its equity position in its core businesses, including its agricultural and prefabricated buildings divisions, and for working capital.

Corporate Social Responsibility

 

Lonrho believes that its investments and acquisitions in Africa encourage job creation and help to stimulate economic activity in those countries in which it operates. The Group endeavours to make a positive difference to the local communities in which its companies are based.

 

·; Luba Freeport continues to sponsor the local school which provides education for over 100 children. Domestic waste disposal services are also provided for the town of Luba. Students are employed on an annual basis providing valuable work experience.

 

·; Fly540 recently paid for the construction of a kitchen block at the Imani Childrens Home, which will greatly improve the quality of life of the children in the home. Fly540 also hosted their Christmas Party, provides free flights to their branches and sponsors the further education of a number of children.

 

·; Fly540 also provided free flights to doctors involved in Operation Smile, sponsored the Children's Christmas Party at the Terry Hope Centre, and has provided assistance in the form of flights or donations to eleven local community organisations.

 

·; As part of Fly540's ongoing commitment to preserving the environment, Fly540 has been involved in tree planting in both Mombasa and Nairobi as a contribution towards the drive to preserve the water catchment areas in Kenya. It has also supported and promoted the cleaning up of the beach, and was involved in tree planting, in Bujumbura, Burundi.

 

·; Hotel Cardoso funded the repainting of the local school buildings which was completed in December 2008. The second and final stage of the landscaping of the park adjacent to the Hotel, Zona de Jogos, which has been funded by the Hotel, was also completed, along with an amphitheatre for use by schoolchildren and the public. The park provides a good safe venue for children at the adjacent school to use during breaks and after school hours. A café was opened in March 2009 employing 23 additional staff.

 

·; Hotel Cardoso donated furniture, bed linen and towels arising from the refurbishment undertaken at the Hotel to a local organisation.

 

·; Hotel Cardoso also provides an in-house clinic for 178 staff members and their immediate families, with a full time nurse and a qualified doctor that visits the clinic twice daily.

 

·; E-Kwikbuild donated two care centres for underprivileged pre-school children in Cape Town.

 

·; E-Kwikbuild also made a cash donation towards essential equipment for a medical facility in Khayalitshe in Cape Town and a number of smaller donations to local community organisations to assist them with building facilities.

 

Lonrho recognises that employment is key to the growth of Africa and currently employs over 1,100 people throughout the Group. All employees are treated equally and with respect, and the Company encourages internal and external training of staff where appropriate to develop requisite knowledge and skills.

 

E-Kwikbuild is creating employment for subcontractors to erect the buildings that they manufacture. The necessary training is provided and quality checks are carried out on their work in the field. This is recognised as a transfer of skills by the South African Government and contributes towards the company's Black Economic Empowerment status.

 

Lonrho aims to protect the environment and has an office recycling policy whereby waste paper is recycled where possible. Company stationary and business cards are produced using recycled stock and Annual and Interim Reports are printed on '9 lives 55' stock, which is produced with 55% recycled fibre together with 45% FSC certified virgin fibre from well managed forests. A policy to reduce carbon emissions in the workplace is being developed.

 

To maximise the benefit to the communities in which Lonrho operates, the Group will continue to develop its corporate and social responsibility programme over the coming year. A Committee of the Board of Lonrho Plc has recently been established to promote this further.

 

 

Executive Directors

 

 

 David Lenigas Executive Chairman

David Lenigas holds a Bachelor of Applied Science in Mining Engineering. He has extensive experience operating in the public company environment and is currently the Chairman of LonZim Plc, Leni Gas & Oil Plc, Templar Minerals Limited, Solo Oil Plc, Zest Group Plc and Lonrho Mining Limited and is a non-executive Director of Vatukoula Gold Mines Plc.

Geoffrey White

Director & Chief Executive Officer

Geoffrey White holds a BSc in Economics and Management Science. During his 28 year career he has held senior management roles with Thomas Tilling Plc, BTR Plc,  Dee Corporation Plc, Asda Plc and latterly worked for five years for a private investment fund based in London. He has been responsible for the planning, financing, development and management of a range of projects in the leisure, industrial and natural resource sectors. These projects include establishing joint ventures with international corporations such as Hilton Hotels International, Ford Motors (PAG), Praton International GmbH and FFS Refiners (pty) Ltd. He is also an Executive Director of LonZim Plc.

David Armstrong Finance Director

David Armstrong (FCA) brings with him extensive experience of operating across Africa having been, until October 2004, the Commercial Director of Diageo Africa with combined functional responsibility for finance, information systems, strategy and business development. He contributed to the successful deployment of Diageo's pan-African growth strategy, encompassing over 50 countries. More recently, he has been the COO of McArtherGlen in the UK and Europe. He is also Finance Director of Lonzim Plc.

Emma Priestley Executive Director

Emma Priestley worked in investment banking for 5 years following a career as a mining engineer. She has a background in mining and financial services having worked with consultants IMC Mackay & Schnellman, investment bank CSFB, advisors VSA resources and Ambrian Partners, where she worked as a corporate broker and advisor. Emma is a graduate of Camborne School of Mines, a Chartered Mining Engineer and Chartered Mineral Surveyor. She is also an Executive Director of LonZim Plc.

 

Non-Executive Directors & General Counsel

 

 Jean Ellis Non-Executive Director

Jean Ellis is a Chartered Accountant and Chartered Tax Advisor, and holds an Insolvency Practitioner's license. She is the senior partner in the regional firm of Chartered Accountants, Duncan Sheard Glass, having been a partner there since 2002. Prior to this, she was Group Financial Controller and Tax Manager with Lonrho Plc and holds a number of directorships for its subsidiary companies. Jean has a Bachelor of Arts Degree in Pure Mathematics from Liverpool University. She was formerly Finance Director of Lonrho Plc and Lonzim Plc and is currently a Non-Executive Director of Lonzim Plc.

Donald Strang Non-Executive Director

Donald Strang is a Chartered Accountant with over 16 years experience in financial management predominantly within the natural resources sector. He has previously held financial positions with several publicly listed mining companies (including Global Coal Management Plc, Brinkley Mining Plc, Macraes Mining Company Limited and Perilya Mines Limited), Ernst & Young and in the investment banking sector.

 

Ambassador Frances Cook Non-Executive Director

A former U.S. ambassador to Burundi, to Cameroon and to the Sultanate of Oman, Ambassador Cook also held numerous senior positions in the Department of State, including Deputy Assistant Secretary of State for Refugee Programs, and Deputy Assistant Secretary of State for Political-Military Affairs, Consul General in Alexandria, Egypt, and Director for West Africa. She transitioned to the private sector in May 1999, where she runs an international business consulting firm, The Ballard Group llc. Ambassador Cook currently serves on the boards of Alliant Techsystems (NYSE) and Global Options Group (NASDAQ), and the Corporate Council on Africa. She is a Senior Fellow at the Center for Naval Analyses, and a member of the Council on Foreign Relations. She was educated at the Universities of Virginia and Harvard, and resides in Washington, D.C.

Michael Bennett General Counsel

Michael Bennett has a BA LLB degree from Rhodes University in South Africa and was admitted as a legal practitioner in the Republic of Zimbabwe in 1996. He practiced law at one of the biggest firms in Zimbabwe before moving to the United Kingdom in 2000 and joined a corporate law firm in central London specialising in mergers and acquisitions and AIM related transactional work. He qualified as an English solicitor in 2001 becoming a partner in 2004. Michael has specialised in the acquisition and disposal of companies across a variety of sectors and in jurisdictions ranging across Africa, Europe, the former Soviet Union and North America.

Statement of Directors' responsibilities in respect of the

Annual Report and Accounts 2009

 

The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations.

 

Company law requires the Directors to prepare Group and parent Company financial statements for each financial year. As required by the AIM Rules of the London Stock Exchange they are required to prepare the Group financial statements in accordance with IFRSs as adopted by the EU and applicable law and have elected to prepare the parent Company financial statements on the same basis.

 

Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and parent Company and of their profit or loss for that period. In preparing each of the Group and parent Company financial statements, the Directors are required to:

 

• select suitable accounting policies and then apply them consistently;

• make judgments and estimates that are reasonable and prudent;

• state whether they have been prepared in accordance with IFRSs as adopted by the EU; and

• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and the parent Company will continue in business.

 

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the parent Company's transactions and disclose with reasonable accuracy at any time the financial position of the parent Company and enable them to ensure that its financial statements comply with the Companies Act 2006. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities.

 

 

Report of the Directors

For the year ended 30 September 2009

 

The Directors of Lonrho Plc submit their report, together with the audited financial statements for the year ended 30 September 2009.

The Company number is 2505337.

 

Principal activities

 

The Group has re-established itself as a pan-African Group with a diverse portfolio of investments. In order to create maximum value for shareholders the management is implementing the investment strategy outlined in the Chairman's Statement.

 

Business review and development

 

The Chairman's statement and the Chief Executive's review of operations contain information on developments during the year and key potential future developments.

The requirements of the enhanced business review in relation to strategy and progress thereon are contained in the Chairman's statement and the Chief Executive's review of operations. The principal risks and uncertainties relate to the revenue generation in the Group's businesses, which being located in Africa are subject to respective government policies, political stability and general economic conditions in the relevant country. Other risks to which the Group is exposed are the lack of suitably experienced management and exposure to foreign currency movements.

The Group monitors cash flow as its primary key performance indicator. Given the current global financial situation, the Directors are carefully monitoring cash resources within the Group and have instigated a number of initiatives to ensure funding will be available for planned projects. The operating cash outflow for the year to 30 September 2009 was £14.5 million (2008: £35.7 million). If such funding cannot be secured, the projects will be delayed or cancelled to ensure that the Group can manage its cash resources for the foreseeable future and hence the financial statements have been prepared on a going concern basis. The group has raised additional capital since the year end (note 35). The Group also uses a number of other key performance indicators which are measured at different tiers in the operation. At the top level, the Group tracks turnover, gross margin, contribution to overheads, cash generation and performance against budget. The Group uses a number of specific, non-financial, key performance indicators at individual business levels. For example passenger numbers and load factors for Fly540, occupancy levels at Hotel Cardoso, and ship movements at Luba Freeport.

The Directors wish to mitigate risk by proper evaluation of every investment that is made and have therefore developed a risk analysis reporting procedure, which links into the Company's Corporate Governance procedures. The Group is continuing to strengthen its management team by the recruitment of highly experienced individuals.

Further information concerning the Group's policies and exposure to financial risk can be found in note 29 to the financial statements.

Post balance sheet events

Detailsof the significant events since the balance sheet date are contained in note 35 to the financial statements.

 Dividend The Directors do not recommend the payment of a dividend (2008 £nil).

 

Corporate governance

 

Compliancewith the Combined Code

 

The Directors recognise the value of the Combined Code on Corporate Governance and, whilst under AIM rules full compliance is not required, the Directors have considered the recommendations and applicability insofar as is practicable and appropriate for a public company of its size.

 

Board of Directors

 

The Board of Directors currently comprises four Executive Directors, one of whom is the Chairman, and three Non-Executive Directors. The Directors are of the opinion that the Board comprises a suitable balance to enable the recommendations of the Combined Code to be implemented to an appropriate level. The Board, through the Chairman in particular, maintains regular contact with its advisers and public relations consultants in order to ensure that the Board develops an understanding of the views of the major shareholders about the Company.

 

The Board meets quarterly and is responsible for formulating, reviewing and approving the Company's strategy, financial activities and operating performance. Day to day management is devolved to the executive management who are charged with consulting the Board on all significant financial and operational matters. Consequently decisions are made promptly following consultation amongst the Directors and managers concerned where necessary and appropriate.

 

All necessary information is supplied to the Directors on a timely basis to enable them to discharge their duties effectively, and all Directors have access to independent professional advice, at the Company's expense, as and when required.

 

The Chairman is available to meet with institutional shareholders to discuss any issues and concerns regarding the Group's governance. The Non-Executive Directors may also attend meetings with major shareholders if requested.

 

The participation of both private and institutional investors at the Annual General Meeting is encouraged by the Board.

 

Internal controls

 

The Directors acknowledge their responsibility for the Company's and the Group's systems of internal control, which are designed to safeguard the assets of the Group and ensure the reliability of financial information for both internal use and external publication. Overall control is ensured by a regular detailed reporting system covering the state of the Group's financial affairs. The Board has implemented procedures for identifying, evaluating and managing the significant risks that face the Group.

 

Any system of internal control can provide only reasonable, and not absolute, assurance that material financial irregularities will be detected or that the risk of failure to achieve business objectives is eliminated.

 

Committees

 

The Board has devolved duties to the following committees:

 

Executive Committee

 

The Executive Committee ("the Committee") comprises the Executive Directors and senior managers including the Group's General Counsel, Group Financial Controller and the Business Development Manager. The Chairman of the Committee is David Lenigas or, in his absence, Geoffrey White. Its terms of reference indicate at least 8 regular meetings per year. The Committee's primary responsibilities are to review the operating performance of each Group operating company, manage the Group's strategic planning process and corporate acquisition and disposal programme, monitor and approve capital expenditure and contracts entered into by the Group and to manage the Group's HR policies.

 

Audit Committee

 

The Audit Committee ("the Committee") comprises three Directors, two of whom are Non-Executive Directors. The current members are Donald Strang (Chairman), Jean Ellis and Geoffrey White. Its terms of reference indicate at least three regular meetings per year. The Committee's primary responsibilities are to review the effectiveness of the Company's systems of internal control and financial reporting systems (including financial, operational, compliance and risk management), to review with the external auditors the nature and scope of their audit and the results of the audit, to evaluate and select external auditors ensuring their independence and objectivity, and to review the Company's financial statements.

 

Remuneration Committee

 

The Remuneration Committee ("the Committee") comprises three Directors, two of whom are Non-Executive Directors. The current members are Donald Strang (Chairman), Ambassador Frances Cook and David Armstrong. Its terms of reference indicate at least two regular meetings per year. The Company's policy is to remunerate senior executives fairly in such a manner as to facilitate the recruitment, retention and motivation of staff. The Committee will agree with the Board a framework for the remuneration of the Chairman, the Executive Directors and the senior management of the Group.

 

The principal objective of the Committee is to ensure that members of the executive management of the Company are provided incentives to encourage enhanced performance and are, in a fair and responsible manner, rewarded for their individual contributions to the success of the Company bearing in mind inter alia the size, profitability, market capitalisation of the Group, its reputation and performance relative to other companies, the performance of individuals and the best interests of shareholders. Non-Executive Directors' fees are considered and agreed by the Board as a whole.

 

Nomination Committee

 

The Nomination Committee ("the Committee") comprises three Directors, two of whom are Non-Executive Directors. The current members are Jean Ellis (Chairperson), Ambassador Frances Cook and Geoffrey White. Its terms of reference indicate at least two regular meetings per year. The Committee's primary responsibility is to identify candidates to fill Board vacancies as and when they arise, give consideration to succession planning, review the structure, size and composition of the Board and to review the leadership needs of the organisation.

 

Directors

 

The present Board of the Company is set out on pages 8 and 9. On 1 December 2008 Mr D Armstrong was appointed as Finance Director and Mrs J M Ellis, who previously held the position, became a Non-Executive Director. Mr D A Lenigas, Mr G T White, Ms E K Priestley, Mr D I G L Strang and Ambassador F D Cook served as Directors throughout the year.

 

At the forthcoming Annual General Meeting, Mrs J M Ellis and Mr G T White will retire by rotation. Being eligible, they will offer themselves for re-election. Biographical details of all Directors are set out on page 8 and 9.

 

Directors' share interests

 

The Directors at the year-end are set out below. All Directors served throughout the year unless otherwise indicated.

		At 30.09.09 No of shares		At 01.10.08 or date of appointment if later No of shares
D A Lenigas		250,000		250,000
G T White		200,000		200,000
D Armstrong (appointed 1 December 2008)		200,000		Nil
E K Priestley		40,712		40,712
Ambassador F Cook		Nil		Nil
J M Ellis		4,000		4,000
D I G L Strang		Nil		Nil

 

All of the above interests are recorded in the Company's Register of Directors' Share and Debenture Interests. No Director has a beneficial interest in the shares or debentures of any of the Company's subsidiary undertakings. There have been no changes in Directors' share interests since 30 September 2009.

 

Share options

During the year, unapproved share options were granted over ordinary shares and the exercise price of options previously granted amended, as set out below. These options are embodied in an individual contract between the Company and the individual and have been granted under The Lonrho Plc Unapproved Share Option Plan.

 

	As at 1.10.2008	Original exercise price	Granted during the year	As at 30.09.09	Adjusted exercise price	Exercise period
D A Lenigas	3,500,000	17p	-	3,500,000	6.5p	Jan 2006 - Jan 2011
D A Lenigas	3,750,000	34.5p	-	3,750,000	6.5p	April 2007 - April 2012
D A Lenigas	1,615,000	44p	-	1,615,000	6.5p	July 2007 - July 2012
D A Lenigas	-	-	2,500,000	2,500,000	6.5p	Jan 2009 - Jan 2014
G T White	2,500,000	34.5p	-	2,500,000	6.5p	April 2007 - April 2014
G T White	1,065,000	44p	-	1,065,000	6.5p	July 2007 - July 2012
G T White	-	-	2,000,000	2,000,000	6.5p	Jan 2009 - Jan 2014
D Armstrong	-	-	1,000,000	1,000,000	6.5P	Jan 2009 - Jan 2014
E K Priestley	1,250,000	22.5p	-	1,250,000	6.5p	April 2006 - April 2011
E K Priestley	1,250,000	34.5p	-	1,250,000	6.5p	April 2007 - April 2012
E K Priestley	1,065,000	44p	-	1,065,000	6.5p	July 2007 - July 2012
E K Priestley	-	-	1,000,000	1,000,000	6.5p	Jan 2009 - Jan 2014
F D Cook	-	-	500,000	500,000	6.5p	Jan 2009 - Jan 2014
J M Ellis	350,000	44p	-	350,000	6.5p	July 2007 - July 2012
J M Ellis	-	-	500,000	500,000	6.5p	Jan 2009 - Jan 2014
D I G L Strang	500,000	34.5p	-	500,000	6.5p	April 2007 - April 2012
D I G L Strang	200,000	44p	-	200,000	6.5p	July 2007 - July 2012
D I G L Strang	-	-	500,000	500,000	6.5p	Jan 2009 - Jan 2014

 

Insurance

The Company has effected Directors and Officers Liability insurance cover for Group Directors.

Substantial shareholdings

 

The Directors have been advised of the following shareholdings at 26th February 2010 in 3 per cent. or more of the Company's issued share capital:

 

Declared Substantial Shareholdings	Number of Shares	% of Issued Capital
Mackenzie Cundill Investment Management Ltd	130,908,213	12.46%
Capital Research and Management Company	101,202,000	9.64%
Zesiger Capital Group LLC	87,966,000	8.38%
Capital Group International, Inc	84,270,915	8.02%
Eton Park Master Fund, Ltd	70,000,000	6.67%
L.R. Global Partners L.P. and L.R. Global Fund Ltd	51,637,216	4.92%
BlackRock, Inc.	48,500,000	4.62%

 

Share price performance

 

Between 1 October 2008 and 30 September 2009 the share price in London varied between a high of 17.00p and a low of 2.35p and in Johannesburg a high of Rand 4.10 and a low of Rand 0.35. At 30 September 2009 the mid-market price of the shares was 8.03p in London and Rand 1.22 in Johannesburg. At 26th February 2010, the mid-market price of the shares was 13.00p in London and Rand 1.60 in Johannesburg.

 

Political and charitable donations

The Company made a charitable donation of £3,000 to Sinenjongo High School in Cape Town.

 

No other political or charitable donations, save for those disclosed on page 7, have been made by the Group during the year. The Group is involved in a number of charitable projects through its subsidiaries and investments, details of which are set out on page 7.

 

Payment to suppliers

 

The Group does not follow any code or standard with regard to the payment of its suppliers. The Group's policy is to agree terms and conditions with suppliers in advance; payment is then made in accordance with the agreement provided the supplier has met the terms and conditions. Amounts due to suppliers at the balance sheet date are contained in note 27.

 

City Code on Takeovers and Mergers

 

The Panel on Takeovers and Mergers confirmed that, at the date the Listing Particulars were issued in May 1998, Lonrho was subject to the City Code on Takeovers and Mergers (the "Code"). The Directors believe that, so far as is practicable, they have operated and will continue to operate the Group so that it will continue to be subject to the Code.

 

Auditors

 

A resolution to re-appoint KPMG Audit Plc and to authorise the Directors to fix their remuneration will be proposed at the Annual General Meeting in accordance with section 489 of the Companies Act 2006.

 

The Directors who held office at the date of approval of this Directors' Report confirm that, so far as they are each aware, there is no relevant audit information of which the Company's Auditors are unaware; and each Director has taken all the steps that he/she ought to have taken as a Director to make himself/herself aware of any relevant audit information and to establish that the Company's Auditors are aware of that information.

 

Annual General Meeting

 

The Annual General Meeting will be held on Wednesday 31st March 2010 at 11.00am at The Great Hall, Merchant Taylors' Hall, 30 Threadneedle Street, London, EC2R 8JB.

 

 

 

 

By order of the Board J. Hughes

Company Secretary

2nd March 2010

 

 

 

Independent Auditors' Report to the Members of Lonrho Plc

 

We have audited the financial statements of Lonrho Plc for the year ended 30 September 2009 set out on pages 17 to 64. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the EU and, as regards the parent company financial statements, as applied in accordance with the provisions of the Companies Act 2006.

 

This report is made solely to the Company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an auditors' report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members, as a body, for our audit work, for this report, or for the opinions we have formed.

 

Respective responsibilities of directors and auditors

 

As explained more fully in the Directors' Responsibilities Statement set out on page 10, the Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board's (APB's) Ethical Standards for Auditors.

 

Scope of the audit of the financial statements

 

A description of the scope of an audit of financial statements is provided on the APB's web-site at www.frc.org.uk/apb/scope/UKNP

 

Opinion on financial statements

 

In our opinion:

• the financial statements give a true and fair view of the state of the Group's and of the parent Company's affairs as at 30 September 2009 and of the group's loss for the year then ended;

• the group financial statements have been properly prepared in accordance with IFRSs as adopted by the EU;

• the parent Company financial statements have been properly prepared in accordance with IFRSs as adopted by the EU and as applied in accordance with the provisions of the Companies Act 2006; and

• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.

 

Opinion on other matter prescribed by the Companies Act 2006

 

In our opinion the information given in the Directors' Report for the financial year for which the financial statements are prepared is consistent with the financial statements.

 

Matters on which we are required to report by exception

 

We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:

• adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or

• the parent Company financial statements are not in agreement with the accounting records and returns; or

• certain disclosures of directors' remuneration specified by law are not made; or

• we have not received all the information and explanations we require for our audit.

 

 

 

 

 

I K Bone (Senior Statutory Auditor) for and on behalf of KPMG Audit Plc, Statutory Auditor Chartered Accountants, 8 Salisbury Square, London EC4Y 8BB

2 March 2010

Consolidated Income Statement

for the year ended 30 September 2009

	Note	Continuing operations £m	2009   Discontinued operations £m	Total £m	Continuing operations £m	2008   Discontinued operations £m	Total £m
Revenue	4,5	89.7	1.2	90.9	24.5	18.6	43.1
Cost of sales	6	(72.8)	(1.9)	(74.7)	(15.6)	(38.3)	(53.9)
GROSS PROFIT/(LOSS)		16.9	(0.7)	16.2	8.9	(19.7)	(10.8)
Gain on sale of intangible asset	8	-	-	-	5.8	-	5.8
Other operating income	6	1.1	2.2	3.3	0.3	-	0.3
Impairment of goodwill	9,14	-	-	-	(0.6)	(5.1)	(5.7)
Operating costs	6	(29.5)	(0.1)	(29.6)	(22.6)	(4.8)	(27.4)
OPERATING LOSS		(11.5)	1.4	(10.1)	(8.2)	(29.6)	(37.8)
Finance income	11	6.6	-	6.6	6.6	-	6.6
Finance expense	11	(1.2)	-	(1.2)	(0.8)	(2.7)	(3.5)
NET FINANCE INCOME/(EXPENSE)		5.4	-	5.4	5.8	(2.7)	3.1
Share of results of associates	17	0.4	-	0.4	(4.0)	-	(4.0)
Share of results of joint ventures	17	(0.2)	-	(0.2)	-	-	-
PROFIT/(LOSS) BEFORE TAX		(5.9)	1.4	(4.5)	(6.4)	(32.3)	(38.7)
Income tax charge	12	(0.8)	-	(0.8)	(0.2)	(2.1)	(2.3)
PROFIT/(LOSS) FOR THE YEAR		(6.7)	1.4	(5.3)	(6.6)	(34.4)	(41.0)
ATTRIBUTABLE TO:
Equity holders of the parent	23	(7.6)	1.4	(6.2)	(5.7)	(27.6)	(33.3)
Minority interest	23	0.9	-	0.9	(0.9)	(6.8)	(7.7)
LOSS FOR THE YEAR		(6.7)	1.4	(5.3)	(6.6)	(34.4)	(41.0)
EARNINGS PER SHARE
Basic loss per share (pence)	13	(1.06)	0.20	(0.86)	(1.5)	(7.5)	(9.0)
Diluted loss per share (pence)	13	(1.06)	0.20	(0.86)	(1.5)	(7.5)	(9.0)

 

The notes on pages 21 to 64 are an integral part of these financial statements.

 

Company and Consolidated Statements of Recognised

Income and Expense

for the year ended 30 September 2009

	Group		Company
Note	2009 £m	2008 £m	2009£m	2008 £m
Foreign exchange translation differences 23 Revaluation of property, plant and equipment 15 Deferred tax on revaluation of property, plant and equipment 12	(2.8) - -	0.4  4.9 (1.0)	- - -	- - -
NET INCOME RECOGNISED DIRECTLY IN EQUITY	(2.8)	4.3	-	-
Loss for the year	(5.3)	(41.0)	(7.0)	(7.2)
Total recognised expense for the year	(8.1)	(36.7)	(7.0)	(7.2)
ATTRIBUTABLE TO: - Equity holders of the parent - Minority interest	(8.6) 0.5	(31.4) (5.3)	(7.0) -	(7.2) -
Total recognised expense for the year	(8.1)	(36.7)	(7.0)	(7.2)
The notes on pages 21 to 64 are an integral part of these financial statements.

Company and Consolidated Balance Sheets

as at 30 September 2009

	Note	2009 £m	Group 2008 £m	Company 2009 2008 £m £m
ASSETS
Goodwill	14	14.2	5.1	-	-
Other intangible assets	14	3.4	0.8	-	-
Property, plant and equipment	15	69.8	56.8	-	-
Investments in subsidiaries	16	-	-	31.5	31.5
Investments in associates and joint ventures	17	9.2	8.8	7.7	7.3
Other investments	18	0.6	0.7	-	-
Deferred tax	19	-	-	-	-
TOTAL NON-CURRENT ASSETS		97.2	72.2	39.2	38.8
Inventories	20	3.4	2.2	-	-
Trade and other receivables	21	32.4	11.6	56.3	45.4
Cash and cash equivalents	22	6.9	10.2	-	-
Assets classified as held for sale	9	-	2.6	-	-
TOTAL CURRENT ASSETS		42.7	26.6	56.3	45.4
TOTAL ASSETS		139.9	98.8	95.5	84.2
EQUITY
Share capital	23	8.0	4.6	8.0	4.6
Share premium account	23	104.7	91.3	104.7	91.3
Revaluation reserve	23	4.1	4.5	-	-
Share option reserve	23	2.5	2.2	2.5	2.2
Translation reserve	23	(2.0)	-	-	-
Retained earnings	23	(39.2)	(33.0)	(21.3)	(14.3)
TOTAL EQUITY ATTRIBUTABLE TO EQUITY
HOLDERS OF THE COMPANY		78.1	69.6	93.9	83.8
MINORITY INTEREST	23	3.0	0.1	-	-
TOTAL EQUITY		81.1	69.7	93.9	83.8
LIABILITIES
Financial liabilities	25	0.3	0.3	-	-
Interest bearing loans and borrowings	24	15.3	-	-	-
Deferred tax	19	3.0	1.7	-	-
Obligations under finance leases	24	1.1	1.1	-	-
TOTAL NON-CURRENT LIABILITIES		19.7	3.1	-	-
Bank overdraft	22	0.9	0.4	0.7	-
Interest-bearing loans and borrowings	24	1.5	3.3	-	-
Obligations under finance leases	24	0.2	0.2	-	-
Trade and other payables	27	36.5	13.8	0.9	0.4
Liabilities classified as held for sale	9	-	8.3	-	-
TOTAL CURRENT LIABILITIES		39.1	26.0	1.6	0.4
TOTAL LIABILITIES		58.8	29.1	1.6	0.4
TOTAL EQUITY AND LIABILITIES		139.9	98.8	95.5	84.2

 

The notes on pages 21 to 64 are an integral part of these financial statements.

These financial statements were approved by the Board of Directors and authorised for issue on 2 March 2010. They were signed on its behalf by:

Geoffrey White Director

Company and Consolidated Cash Flow Statements

for the year ended 30 September 2009

	Note	Group		Company
		2009 £m	2008 £m	2009 £m	2008 £m
CASH FLOWS FROM OPERATING ACTIVITIES Loss for the year Adjustments	28	(5.3) (0.7)	(41.0) 6.6	(7.0) 0.3	(7.2) -
CASH FLOWS FROM OPERATING ACTIVITIES BEFORE
MOVEMENTS IN WORKING CAPITAL		(6.0)	(34.4)	(6.7)	(7.2)
Change in inventories		(1.1)	(0.5)	-	-
Change in trade and other receivables		(16.7)	(5.4)	(10.9)	(44.7)
Change in trade and other payables		10.1	0.4	0.5	-
CASH GENERATED FROM OPERATIONS		(13.7)	(39.9)	(17.1)	(51.9)
Interest received		0.2	7.1	-	-
Interest paid		(1.0)	(2.7)	-	-
Income tax paid		-	(0.2)	-	-
NET CASH FROM OPERATING ACTIVITIES		(14.5)	(35.7)	(17.1)	(51.9)
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from the sale of property, plant and equipment		3.7	-	-	-
Acquisition of subsidiary, net of cash acquired	7	(2.5)	(2.1)	-	-
Deposits paid in respect of property, plant and equipment		-	(4.4)	-	-
Acquisition of property, plant and equipment		(14.7)	(12.5)	-	-
Acquisition of associates and joint ventures		(2.4)	(1.3)	(0.4)	-
NET CASH FROM INVESTING ACTIVITIES		(15.9)	(20.3)	(0.4)	-
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the issue of share capital		16.8	51.9	16.8	51.9
Loan advance		11.4	0.1	-	-
Repayment of borrowings		(1.1)	(1.1)	-	-
Payment of finance lease liabilities		(0.2)	(0.2)	-	-
NET CASH FROM FINANCING ACTIVITIES		26.9	50.7	16.8	51.9
Net decrease in cash and cash equivalents		(3.5)	(5.3)	(0.7)	-
Cash and cash equivalents at 1 October		9.4	14.5	-	-
Foreign exchange movements		0.1	0.2	-	-
CASH AND CASH EQUIVALENTS AT 30 SEPTEMBER	22	6.0	9.4	(0.7)	-
The notes on pages 21 to 64 are an integral part of these financial statements.

 

Notes to the Company and Consolidated Financial

Statements

 

1 Reporting entity

Lonrho Plc (the "Company") is a company incorporated and domiciled in the United Kingdom. The consolidated financial statements of the Company for the year ended 30 September 2009 comprise the Company and its subsidiaries (together referred to as the "Group") and the Group's interest in associates and jointly controlled entities.

The financial statements were authorised for issue by the Directors on 2nd March 2010.

 

2 Basis of preparation

Statement of compliance

Both the parent Company and the consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union (Adopted IFRS). On publishing the parent Company financial statements here together with the Group financial statements, the Company is taking advantage of the exemption in section 408(4) of the Companies Act 2006 not to present its individual income statement and related notes that form a part of these approved financial statements. The loss of the Company is disclosed in note 23 to the accounts.

Going concern

Given the current global financial crisis, the Directors are carefully monitoring cash resources within the Group and have instigated a number of initiatives to ensure funding will be available for planned projects. As described in note 35, the Company has raised £25.1 million in December 2009 through share issues.

Functional and presentation currency

The financial statements are presented in pounds sterling which is the Company's functional currency. All financial information presented has been rounded to the nearest £0.1 million.

Basis of measurement

The financial statements have been prepared on the historical cost basis except for the revaluation of certain long leasehold properties, and the recognition of available-for-sale financial assets at fair value.

At the date of authorisation of the financial statements, the following Standards and Interpretations which have not been applied to these financial statements were in issue but not yet effective:

 

·; Revised IFRS 3 - Business combinations

·; Amendments to IFRS 1 and IAS 27 - Cost of an investment in a subsidiary, jointly controlled entity or associate

·; Amendments to IFRS 2 - Share based payments

·; Amendments to IFRS7 - Financial Information Disclosure

·; Amendments to IFRS 8 - Segment reporting

·; Amendments to IAS 27 - Consolidated and separate financial statements

·; Amendments to IAS 32 and IAS 1 - Puttable financial instruments and obligations arising on liquidation

·; Amendments to IAS 23 - Borrowing costs

·; Amendments to IAS 1 (Revised) - Statements of Comprehensive Income

 

Revised IAS 1 Presentation of Financial Statements (2007)

Revised IAS 1 introduces the term total comprehensive income, which represents changes in equity during a period other than those changes resulting from transactions with owners in their capacity as owners. Total comprehensive income may be presented in either a single statement of comprehensive income (effectively combining both the income statement and all non-owner change in a single statement), or in an income statement and a separate statement of comprehensive income. Revised IAS1, which becomes mandatory for the Group's 2010 consolidated financial statements, is expected to have a significant impact on the presentation of comprehensive income in a single statement of comprehensive income for its 2010 consolidated statements.

 

 

Revised IFRS 3 Business combinations (2008)

Revised IFRS 3 incorporates the following changes that are likely to be relevant to the Group's operations:

·; The definition of a business has been broadened, which is likely to result in more acquisitions being treated as business combinations.

·; Contingent consideration will be measured at fair value, with subsequent changes therein recognised in the income statement.

·; Transaction costs, other than share and debt issue costs, will be expensed as incurred.

·; Any pre-existing interest in the acquiree will be measured at fair value with the gain or loss recognised in the income statement.

·; Any non-controlling (minority) interest will be measured at either fair value, or at its proportionate interest in the identifiable assets and liabilities of the acquiree, on a transaction-by-transaction basis.

Revised IFRS 3, which becomes mandatory for the Group's 2010 consolidated financial statements, will be applied prospectively and therefore there will be no impact on prior periods in the Group's 2010 consolidated financial statements.

Amended IAS 27 Consolidated and separate financial statements (2008)

Amended IAS 27 requires accounting for changes in ownership interests by the Group in a subsidiary, while maintaining control, to be recognised as an equity transaction. When the Group loses control of a subsidiary, any interest retained in the former subsidiary will be measured at fair value with the gain or loss recognised in the income statement. The amendments to IAS 27, which become mandatory for the Group's 2010 consolidated financial statements, will impact minority interests in the consolidated financial statements.

Other than IAS 1 Revised, IFRS 3 and IAS 27, the Directors anticipate that the adoption of these Standards and Interpretations in future periods will have no material impact on the financial statements of the Group.

New Standards and Interpretations applicable for the year - IFRIC 13 Customer Loyalty Programmes

This is applicable to these financial statements but has no material impact (due to the immaterial nature of these programme).

Use of estimates and judgements

The preparation of financial statements in conformity with Adopted IFRS requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.

Estimates made by management in the application of Adopted IFRS that have significant effect on the financial statements with a significant risk of material adjustment in the next year are discussed in the following notes:

·; valuation of intangible assets (note 14)

·; valuation of associates and joint ventures (note 17).

Judgements made by management in the application of Adopted IFRS that have significant effect on the financial statements are:

·; the determination of the functional currencies of subsidiaries (see below)

·; the determination of the accounting treatment in respect of the acquisition of investments as either associates, joint ventures or subsidiaries (note 3(a)).

 

The timing of revenue recognition is not subject to significant uncertainty.

Luba Freeport Limited

Luba Freeport Limited, a Jersey registered company, uses US dollars as its functional currency as the significant transactions of the business are denominated in US dollars.

 

3 Significant accounting policies

The accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements and in preparing an opening Adopted IFRS balance sheet as at 1 October 2006 for the purposes of the transition to Adopted IFRS. The accounting policies have been applied consistently by Group entities.

(a) Basis of consolidation Subsidiaries

The consolidated financial statements incorporate the financial statements of Lonrho Plc and entities controlled by Lonrho Plc (its subsidiaries). Control is achieved where Lonrho Plc (the Company) has the power to govern the financial and operating policies of an investee entity so as to obtain benefits from its activities.

The interest of minority shareholders is stated at the minority's proportion of the fair values of the assets and liabilities recognised. Subsequently, losses applicable to the minority in excess of the minority's interest in the subsidiary's equity are allocated against the interests of the Group except to the extent that the minority has a binding obligation and is able to make an additional investment to cover the losses.

 

The results of entities acquired or disposed of during the year are included in the consolidated income statement from the effective date of acquisition or up to the effective date of disposal, as appropriate.

 

All intra-Group transactions, balances, income and expenses are eliminated on consolidation.

Associates and Joint Ventures

An associate is an entity in which the Group has the ability to exercise significant influence but not control over the financial and operating policies. A joint venture is an entity where the Group jointly controls it's financial and operating policy together with other parties. Associates are accounted for using the equity method and are initially measured at cost as adjusted by post- acquisition changes in the Group's share of the net assets of the associate, less any impairment of the individual investments, from the date that significant influence commences until the date it ceases.

Losses of the associates in excess of the Group's interest in those associates are not recognised except to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of its investee. The Group's investment includes goodwill identified on acquisition, net of any impairment losses. Any excess of the cost of acquisition over the Group's share of the fair values of the identifiable net assets of the associate at the date of acquisition is recognised as goodwill. Any deficiency of the cost of acquisition below the Group's share of the fair values of the identifiable net assets of the associate at the date of acquisition (i.e. discount on acquisition) is credited to the income statement in the period of acquisition.

The Company records interests in associate and joint ventures initially at cost and thereafter at cost less provisions for impairment.

Business combinations

The acquisition of subsidiaries and businesses is accounted for using the purchase method. The cost of the acquisition is measured at the aggregate of the fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquiree, plus any costs directly attributable to the business combination. The acquiree's identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS 3 are recognised at their fair values at the acquisition date, except for non-current assets that are classified as held for sale in accordance with IFRS 5, which are recognised and measured at fair value less costs to sell.

Goodwill arising on acquisition is recognised as an asset and initially measured at cost, being the excess of the cost of the business combination over the Group's interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognised.

If, after reassessment, the Group's interest in the net fair value of the acquiree's identifiable assets, liabilities and contingent liabilities exceeds the cost of the business combination, the excess is recognised immediately in the income statement. The interest of minority shareholders in the acquirer is initially measured at the minority's proportion of the net fair value of the assets, liabilities and contingent liabilities recognised.

 

(b) Intangible assets

Goodwill

Goodwill arising on consolidation is recognised as an asset.

Following initial recognition, goodwill is subject to impairment reviews, at least annually, and measured at cost less accumulated impairment losses. The recoverable amount is estimated at each balance sheet date. Any impairment loss is recognised immediately in the income statement and is not subsequently reversed when the carrying amount of the asset exceeds its recoverable amount.

Any impairment losses recognised in respect of cash generating units are allocated first to reduce the carrying amount of any goodwill allocated to cash-generating units (groups of units) and then, to reduce the carrying amount of other assets in the unit (groups of units) on a pro rata basis.

On disposal of a subsidiary, the attributable amount of goodwill is included in the determination of the gain or loss on disposal. Goodwill arising on acquisitions before the date of transition to Adopted IFRS has been retained at the previous UK GAAP amounts, after being tested for impairment at that date.

Other intangible assets

Other intangible assets are measured initially at cost and are amortised on a straight-line basis over their estimated useful lives. The carrying amount is reduced by any provision for impairment where necessary.

On a business combination, as well as recording separable intangible assets already recognised in the balance sheet of the acquired entity at their fair value, identifiable intangible assets that are separable or arise from contractual or other legal rights are also included in the acquisition balance sheet at fair value.

Amortisation on intangible assets is charged on a straight line basis over their useful economic life, on the following basis:

Brands	5 years
Intellectual property	5 years
Licences	5 years
Customer relationships	5 years

(c) Foreign currencies

The individual financial statements of each Group company are presented in the currency of the primary economic environment in which it operates (its functional currency). For the purpose of the consolidated financial statements, the results and financial position of each Group company are expressed in pounds sterling, which is the functional currency of the Company, and the presentational currency for the consolidated financial statements.

In preparing the financial statements of the individual companies, transactions denominated in foreign currencies are translated into the respective functional currency of the Group entities using the exchange rates prevailing at the dates of transactions. Non-monetary assets and liabilities are translated at the historic rate. Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency at the rates of exchange ruling at the balance sheet date. Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the date that the fair value was determined.

Exchange differences arising on the settlement of monetary items, and on the retranslation of monetary items, are included in the income statement for the period. Exchange differences arising on the retranslation of non-monetary items carried at fair value in respect of which gains and losses are recognised directly in equity are also recognised directly in equity.

For the purpose of presenting consolidated financial statements, the assets and liabilities of the Group's foreign operations are translated at exchange rates prevailing at the balance sheet date. Income and expense are translated at the average exchange rates for the period, unless exchange rates fluctuate significantly during that period, in which case weighted average rates are used. Exchange differences arising, if any, are classified in equity and are transferred to the Group's foreign currency translation reserve within equity. Such translation is recognised as income or as expense in the period in which the operation is disposed of.

All foreign exchange gains or losses that are reflected in the income statement are presented within financing income or expense.

 

(d) Hyperinflation

The Group acquired an associate, LonZim Plc, in 2008 whose main operations are in Zimbabwe. The policy adopted by LonZim Plc for hyperinflation is stated below:-

 

"The uncertainties in the adverse Zimbabwean economic environment have resulted in subsidiaries of the Group operating in Zimbabwe changing their functional currency from Zimbabwe dollars to United States dollars.

 

The rate of increase of inflation in Zimbabwe reached extraordinary levels in the last quarter of 2008. This was exacerbated by the existence of multiple exchange rates, the use of foreign currencies for some transactions and the existence of multiple pricing criteria for similar products based on the mode of settlement. The effect was that the Zimbabwe dollar was no longer a functional currency for financial reporting purposes and resulted in a change in the functional currency for most entities reporting in Zimbabwe. With effect from 1 February 2009, the subsidiaries Celsys, Millpal and Paynet changed their functional currency from the Zimbabwe dollar to the United States dollar as it was evident that the United States dollar represents the currency of the prime economic environment in which the respective companies operate. On 29 January 2009 and on 2 February 2009 the Fiscal and Monetary Authorities gave recognition to the fact that the Zimbabwe dollar was no longer a functional currency and authorised the use of multiple foreign currencies for trading in Zimbabwe.

 

The basis of preparation and presentation of the financial statements of Celsys, Millpal and Paynet for inclusion in the Lonzim Plc consolidated accounts follows the guidance issued by the Public Accountants and Auditors Board and the Zimbabwe Accounting Practices Board. This guidance was issued to assist preparers of financial statements in converting their financial statements from Zimbabwe dollars into their new functional currency in a manner that is consistent with the principles of International Financial Reporting Standards, in as far as is practicable, in the Zimbabwean economic environment, at the date of the change of the functional currency. As suggested by the guidance, assets and liabilities carried at fair value were valued at the date of change of the functional currency and carried at the fair values in the new functional currency. Non-monetary assets and liabilities were valued at their deemed costs. Equity was recognized as the residual of the Company's net assets and will be treated as a non-distributable reserve until clarity has been obtained on the legal position with respect to the treatment of share capital. Further clarification of reserves will be pursued after the legal consideration attendant to share capital has been addressed.

 

The financial performance, as reflected in the income statement, includes only the financial performance of Celsys, Millpal and Paynet after the change in their functional currency at 1 February 2009 however it was considered that any translation of results for the period pre-dollarization be deemed immaterial in the context of the Group accounts. The Directors believe that the balance sheet that has been presented is a fair reflection of the assets and liabilities of the Company in accordance with International Finance Standards and, therefore, a fair reflection of the shareholders' equity."

(e) Taxation

The tax expense represents the sum of current tax and deferred tax.

 Current taxation

Current tax is based on taxable profit for the period. Taxable profit differs from net profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.

 

Deferred taxation

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.

Deferred tax liabilities are recognised for taxable temporary differences arising on the investments in subsidiaries and associates, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax is calculated at the tax rates substantially enacted at the balance sheet date, that apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the income statement, except when it relates to items charged or credited to equity, in which case the deferred tax is also dealt with in equity.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.

(f) Available for sale financial assets

The Group's investments in equity securities that are not associates or joint ventures are classified as available-for-sale financial assets. Subsequent to initial recognition, they are measured at fair value and changes therein, other than impairment losses (see below), are recognised directly in equity. When an investment is de-recognised, the cumulative gain or loss in equity is transferred to the income statement.

Impairment

A financial asset is assessed at each reporting date to determine whether there is any objective evidence that it is impaired.

A financial asset is considered to be impaired if objective evidence indicates that one or more events have had a negative effect on the estimated future cash flows of that asset.

An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount, and the present value of the estimated future cash flows discounted at the original effective interest rate. An impairment loss in respect of an available-for-sale financial asset is calculated by reference to its fair value.

All impairment losses are recognised in the income statement. Any cumulative loss in respect of an available-for-sale financial asset recognised previously in equity is transferred to the income statement.

An impairment loss is reversed if the reversal can be related objectively to an event occurring after the impairment loss was recognised. For financial assets measured at amortised cost, the reversal is recognised in the income statement. For available-for sale financial assets that are equity securities, the reversal is recognised directly in equity.

(g) Property, plant and equipment

Long leasehold land and buildings are stated in the balance sheet at their revalued amounts, being the fair value at the date of revaluation, less any subsequent accumulated depreciation and subsequent accumulated impairment losses. Revaluations are performed with sufficient regularity such that the carrying amount does not differ materially from that which would be determined using fair values at the balance sheet date.

Any revaluation increase arising on the revaluation of such land and buildings is credited to the revaluation reserve, except to the extent that it reverses a revaluation decrease for the same asset previously recognised as an expense, in which case the increase is credited to the income statement to the extent of the decrease previously charged. A decrease in carrying amount arising on the revaluation of such land and building is charged as an expense to the extent that it exceeds the balance if any, held in the revaluation reserve relating to a previous revaluation of that asset. Depreciation on revalued buildings is charged to the income statement. On subsequent sale or retirement of a revalued property, the attributable revaluation surplus remaining is transferred directly to retained earnings.

All other assets are stated at historical cost less accumulated depreciation and accumulated impairment losses.

Depreciation is charged so as to write off the cost or valuation of assets (less estimated residual values updated annually), other than long leasehold land, over their estimated useful lives, on the following basis:

Long leasehold buildings	2% of cost
Short leasehold land and buildings	Over the term of the lease
Plant and machinery	10% of cost
Aircraft	5%-6.67% of cost
Motor cars	15%-25% of cost
Fixtures and fittings	15%-25 % of cost

The gain or loss arising on the disposal of an asset is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in the income statement for the period.

Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets, or where shorter, over the relevant lease term.

In respect of aircraft, subsequent costs incurred which lend enhancement to future periods such as long term scheduled maintenance and major overhaul of aircraft and engines are capitalised and amortised over the length of the period benefiting from those enhancements. All other costs relating to maintenance are charged to the income statement as incurred.

(h) Impairment of assets excluding goodwill, inventories and deferred tax assets

At each balance sheet date, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of any impairment loss. Where the asset does not generate cash flows that are independent from other assets, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount.

An impairment loss is recognised as an expense immediately, unless the relevant asset is carried at a revalued amount in which case the impairment loss is treated as a revaluation decrease.

Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years.

A reversal of an impairment loss is recognised as income immediately, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation increase.

(i) Financial instruments

Financial assets and financial liabilities are recognised in the Group's balance sheet when the Group becomes a party to the contractual provisions of the instrument.

Cash and cash equivalents

Cash and cash equivalents comprise cash in hand and demand deposits and other short term highly liquid investments that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value. Bank overdrafts that are repayable on demand and form an integral part of the Group's cash management are included as a component of cash and cash equivalents for the purpose of the statement of cash flows.

Trade receivables

Trade receivables are measured at initial recognition at fair value and are subsequently measured at amortised cost using the effective interest rate method. Appropriate allowances for estimated recoverable amounts are recognised in the income statement when there is objective evidence the asset is impaired.

Trade payables

Trade payables are initially measured at fair value and are subsequently measured at amortised cost using the effective interest rate method.

Financial liabilities

Financial liabilities are classified according to the substance of the contractual arrangements entered into.

Bank borrowings

Interest bearing bank loans and overdrafts are recorded at the proceeds received, net of direct issue costs.

Equity instruments

Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs.

Capital management

The Board's policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. The Board of Directors monitors the return on capital, which the Group defines as net operating income divided by total shareholders' equity, excluding minority interests.

(j) Inventories

Inventories are stated at the lower of cost and net realisable value. Cost comprises direct materials and where applicable direct expenditure and attributable overheads that have been incurred in bringing the inventories to their present location and condition. Net realisable value represents the estimated selling price less all estimated costs of completion and costs to be incurred in marketing, selling and distribution.

(k) Share based payments

The Group provides benefits to certain employees, including senior executives, in the form of share based payments, whereby employees render services in exchange for shares or rights over shares (equity-settled transactions). The cost of these equity-settled transactions with employees is measured by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined by using a Black-Scholes model. The dilutive effect, if any, of outstanding options is reflected as additional share dilution in the computation of earnings per share.

(l) Interest-bearing borrowings

Interest-bearing borrowings are recognised initially at fair value less attributable transaction costs. Subsequent to initial recognition, interest-bearing borrowings are stated at amortised cost with any difference between cost and redemption value being recognised in the income statement over the period of the borrowings on an effective interest basis.

(m) Dividends

Interim dividends are recognised when paid and final dividends are recognised as liabilities in the period in which they are approved by shareholders.

(n) Provisions

A provision is recognised in the balance sheet when the Group has a present legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation. If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability.

(o) Revenue recognition

Revenue, for the other major segments not detailed below, is derived from the sale of goods and services and is measured at the fair value of consideration received or receivable, after deducting discounts, volume rebates, value-added tax and other sales taxes. A sale of goods and services is recognised when recovery of the consideration is probable, there is no continuing management involvement with the goods and services and the amount of revenue can be measured reliably.

A sale of goods is recognised when the significant risks and rewards of ownership have passed to the buyer, the associated costs and possible return of goods can be estimated reliably. This is when title and insurance risk have passed to the customer and the goods have been delivered to a contractually agreed location.

A sale of services is recognised when the service has been rendered.

Aircraft division

Revenue for the aircraft division comprises the invoiced value of airline services, net of passenger taxes, discounts, plus ancillary revenue. Revenue from the sale of flight seats (passenger revenue) is recognised in the period in which the service is provided. Unearned revenue represents flight seats sold but not yet flown and is included within deferred income.

Shipping division (discontinued operation)

Revenue for the shipping division comprises the invoiced value of shipping services, net of taxes and duties.

Revenue is generated from the transport of containerised goods. The transport of these goods is referred to as a voyage, and a completed voyage comprises both a North bound and South bound leg.

Revenue is recognised on a completed voyage basis.

(p) Leases

Leases are classified according to the substance of the transaction. A lease that transfers substantially all the risks and rewards of ownership to the lessee is classified as a finance lease. All other leases are classified as operating leases.

Finance leases

Finance leases are capitalised in the balance sheet at their fair value or, if lower, at the present value of the minimum lease payments, each determined at the inception of the lease. The corresponding liability is shown as a finance lease obligation to the lessor. Leasing repayments comprise both a capital and a finance element. The finance element is written off to the income statement so as to produce an approximately constant periodic rate of charge on the outstanding obligation.

Operating leases

Operating lease rentals are charged to the income statement on a straight line basis over the period of the lease.

(q) Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.

Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.

All other borrowing costs are recognised in the income statement in the period in which they are incurred.

(r) Loss per share

Basic loss per share is calculated based on the weighted average number of ordinary shares outstanding during the period. Diluted loss per share is based upon the weighted average number of shares in issue throughout the year, adjusted for the dilutive effect of potential ordinary shares. The only potential dilutive ordinary shares in issue are employee share options.

(s) Segment reporting

A segment is a distinguishable component of the Group that is engaged either in providing products or services (business segment), or in providing products or services within a particular economic environment (geographical segment), which is subject to risks and rewards that are different from those of other segments.

(t) Assets and liabilities classified as held for sale

Non-current assets (or disposal groups comprising assets and liabilities) that are expected to be recovered primarily through sale rather than through continuing use are classified as held for sale. Immediately before classification as held for sale, the assets (or components of a disposal group) are remeasured in accordance with the Group's accounting policies. Thereafter generally the assets (or disposal group) are measured at the lower of their carrying amount and fair value less cost to sell. Any impairment loss on a disposal group first is allocated to goodwill, and then to remaining assets and liabilities on a pro rata basis, except that no loss is allocated to inventories, financial assets and deferred tax assets, which continue to be measured in accordance with the Group's accounting policies. Impairment losses on initial classification as held for sale and subsequent gains or losses on re-measurement are recognised in the income statement. Gains are not recognised in excess of any cumulative impairment loss.

 

4 Segment reporting

Segment information is presented in respect of the Group's business and geographical segments. The primary format, business segments, is based on the Group's management and internal reporting structure.

There is no inter-segment revenue.

Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly income-earning assets and revenue, interest-bearing loans, borrowings and expenses, and corporate assets and expenses.

Segment capital expenditure is the total cost incurred during the period to acquire segment assets that are expected to be used for more than one period.

Business segments

For management purposes, the Group is currently organised into five operating divisions.

·; Agribusiness

·; Infrastructure

·; Transport

·; Support services

·; Hotels

·; Cargo and shipping (discontinued)

Geographical segments

All of the segments operate in various parts of Africa.

 

	Agribusiness £m	Infrastructure £m	Transport £m	Support services £m	2009     Hotels £m	Consolidated continuing operations £m	Cargo and shipping discontinued operations £m
EXTERNAL REVENUE	46.5	9.3	21.4	9.1	3.4	89.7	1.2
Segment result	1.0	(4.5)	(5.1)	0.1	0.4	(8.1)	(0.8)
Unallocated expenses						(3.4)	2.2
Impairment of goodwill						-	-
Gain on sale of intangible asset						-	-
OPERATING LOSS						(11.5)	1.4
Net finance income						5.4	-
Share of results of associates						0.4	-
Share of results of joint venture						(0.2)	-
Income tax expense						(0.8)	-
LOSS FOR THE YEAR						(6.7)	1.4

 

 

 

 

 

Business segments

	Agribusiness £m	Infrastructure £m	Transport £m	Support services £m	2008     Hotels £m	Other £m	Consolidated continuing operations £m	Cargo and shipping discontinued operations £m
EXTERNAL REVENUE	-	7.3	9.3	6.1	1.8	-	24.5	18.6
Segment result	-	(0.6)	(4.5)	(0.6)	0.1	-	(5.6)	(24.5)
Unallocated expenses							(7.8)	-
Impairment of goodwill				(0.6)			(0.6)	(5.1)
Gain on sale of intangible asset							5.8	-
OPERATING LOSS							(8.2)	(29.6)
Net finance income/(expense)							5.8	(2.7)
Share of results of associates							(4.0)	-
Income tax expense							(0.2)	(2.1)
LOSS FOR THE YEAR							(6.6)	(34.4)

 

 

	Agribusiness  £m	Infrastructure £m	Transport £m	Support services £m	2009     Hotels £m	Other £m	Consolidated continuing operations £m	Cargo and shipping discontinued operations £m
Segment operating assets	31.8	58.7	14.5	4.5	11.9	-	121.4	-
Investment in associates/joint ventures	-	-	-	-	1.3	7.9	9.2	-
Unallocated assets/interest bearing assets	-	-	-	-	-	9.3	9.3	-
TOTAL ASSETS	31.8	58.7	14.5	4.5	13.2	17.2	139.9	-
Segment operating liabilities	19.4	22.5	5.3	1.2	1.2	-	49.6	-
Unallocated liabilities / interest bearing liabilities	-	-	-	-	-	9.2	9.2	-
TOTAL LIABILITIES	19.4	22.5	5.3	1.2	1.2	9.2	58.8	-
Depreciation of segment assets	1.4	2.4	1.0	0.1	0.4	-	5.3	-
Amortisation of segment assets	0.3	0.1	0.1	0.1	-	-	0.6	-
Capital expenditure	4.6	3.6	1.5	0.9	4.1	-	14.7	-

 

 

	Infrastructure £m	Transport £m	Support services £m	2008     Hotels £m	Other £m	Consolidated continuing operations £m	Cargo and shipping discontinued operations £m
Segment operating assets	44.2	14.6	4.3	11.7	-	74.8	2.5
Investment in associates	2.2	-	-	-	6.6	8.8	-
Unallocated assets / interest bearing assets	-	-	-	-	-	12.6	0.1
TOTAL ASSETS						96.2	2.6
Segment operating liabilities	9.3	2.5	0.8	1.7	-	14.3	7.8
Unallocated liabilities / interest bearing liabilities						6.5	0.5
TOTAL LIABILITIES						20.8	8.3
Depreciation of segment assets	2.1	0.7	0.1	0.2	-	3.1	-
Amortisation of segment assets	-	0.1	0.2	-	-	0.3	-
Capital expenditure	8.5	2.1	0.1	1.8	-	12.5	-
Impairment of intangible assets	-	-	0.7	-	-	0.7	5.1

 

 

Geographical segments

 

		2009			Consolidated Southern Africa
	Southern Africa £m	East Africa £m	West Africa £m	Europe £m	continuing operations £m	discontinued operations £m
Revenue by location of external customers	59.8	21.4	8.0	0.5	89.7	1.2
Revenue by location of assets	59.8	21.4	8.0	0.5	89.7	1.2
Segment net assets	29.5	8.6	35.0	8.0	81.1	-
Capital expenditure	9.6	1.5	3.6	-	14.7	-

 

 

		2008			Consolidated Southern Africa
	Southern Africa £m	East Africa £m	West Africa £m	Europe £m	continuing operations £m	discontinued operations £m
Revenue by location of external customers	7.7	9.3	7.3	0.2	24.5	18.6
Revenue by location of assets	7.9	9.3	7.3	-	24.5	18.6
Segment net assets/(liabilities)	17.5	11.6	33.7	12.6	75.4	(5.7)
Capital expenditure	2.0	1.8	8.4	0.3	12.5	-

5 Revenue

Continuing operations		Discontinued operations		Total
2009	2008	2009	2008	2009	2008
£m	£m	£m	£m	£m	£m

 

Sale of goods	12.4	6.1	-	-	12.4	6.1
Services	77.3	18.4	1.2	18.6	78.5	37.0
	89.7	24.5	1.2	18.6	90.9	43.1

 

6 Group net operating costs

	2009 £m	2008 £m
Cost of sales Administrative expenses Other operating income	74.7  29.6 (3.3)	53.9  27.4 (0.3)
NET OPERATING COSTS (BEFORE IMPAIRMENT OF GOODWILL
AND THE GAIN ON SALE OF INTANGIBLE ASSETS )	101.0	81.0
Administrative expenses include management related overheads for operations and head office.
INCLUDED IN NET OPERATING COSTS ABOVE ARE:
Depreciation of property plant and equipment	5.3	3.1
Impairment of intangible assets (other than goodwill)	-	0.1
Amortisation of intangible assets (other than goodwill)	0.6	0.3
Share based payments (notes 23 and 26)	0.3	-
Operating lease rentals:
- Land and buildings	0.4	0.3
- Plant and machinery	0.1	0.1
- Other	1.7	13.6
Staff costs (note 10)	13.0	9.9
Impairment of trade receivables	0.2	0.7
Legal fees relating to discontinued operations	-	1.4
The costs above include the following relating to discontinued operations:

 

2009 2008

£m £m

Staff costs -  0.3

Impairment of trade receivables - 0.6

Legal fees - 1.4

 

Auditors remuneration

2009 2008

£m £m

 

Fees payable to the Company's auditors for the audit of the Company's annual accounts	0.2	0.2
For the audit of the Company's subsidiaries pursuant to legislation	0.1	0.1
TOTAL AUDIT FEES	0.3	0.3

 

 

7 Acquisition of subsidiaries

On 1 October 2008, the Group acquired 51.0% of the issued share capital of Rollex Pty Limited for a consideration of £7.9 million. Rollex Pty Limited is the parent company of a group of companies involved in the provision of transport and packing solutions for the fruit and vegetable supply industry.

The transaction has been accounted for by the purchase method of accounting. The fair value of the net assets at 1 October 2008 is set out below:

	Pre acquisition carrying value £m	Subscription of shares recognised £m	Fair value adjustments £m	Values recognised on acquisition £m
Property, plant and equipment Intangible assets Deferred tax on intangible assets Inventory Trade and other receivables	3.0 - - 0.1 3.5	- - - - -	0.1 3.0 (1.0) - -	3.1 3.0 (1.0) 0.1 3.5
Cash and cash equivalents	0.8	1.1	-	1.9
Interest-bearing loans and borrowings	(2.6)		-	(2.6)
Trade and other payables	(7.7)	-	-	(7.7)
NET IDENTIFIABLE ASSETS AND LIABILITIES	(2.9)	1.1	2.1	0.3
Minority interest				(0.2)
Consideration paid*				(4.4)
Deferred consideration				(3.5)
GOODWILL ON ACQUISITION				(7.8)
NET CASH INFLOW ARISING ON
ACQUISITION BEFORE DEFERRED CONSIDERATION				(2.5)
* The consideration includes £0.2 million for acquisition costs.

 

The fair value adjustment relates to freehold property held within a subsidiary of Rollex Pty Limited.

The transaction costs incurred to acquire the company were £0.2 million.

The goodwill arising on the acquisition of Rollex Pty Limited is attributable to the anticipated profitability of the distribution of the Group's services and products to new customers and additional activities to be developed as a member of the Lonrho Group.

Rollex Pty Limited contributed £46.5 million to revenue and £1.0 million profit to the Group's loss before tax for the period between the date of acquisition and the balance sheet date.

On 1 October 2008 the Group gained Board control of E-Kwikbuild Pty Limited (formerly treated as an associate).

The company value of E-Kwikbuild Pty Limited within its parent company Kwikbuild Corporation Limited was £2.2 million. This £2.2 million has been re-allocated as follows:

 

Intangibles £0.2 million

Goodwill £1.3 million

Minority interests £0.7 million

There were no acquisition costs.

The goodwill arising on the acquisition of E-Kwikbuild Pty Limited is attributable to the anticipated profitability of the distribution of the Group's services and products.

E- Kwikbuild Pty Limited contributed £1.3 million to revenue and £0.5 million loss to the Group's loss before tax for the period between the date of acquisition and the balance sheet date..

 

2008 Acquisitions

The transactions in 2008 have been accounted for by the purchase method of accounting. The fair value of the net assets acquired are shown below:

 

Kwikbuild Corporation

Limited Total

 £m £m

 

Intangible assets (excluding goodwill)
Investments in associates	2.2				2.2
Cash and cash equivalents	1.0				1.0
Trade and other payables	(0.6)				(0.6)
NET IDENTIFIABLE ASSETS AND LIABILITIES	2.6				2.6
Minority interest					(1.0)
Goodwill on acquisition					1.5
Consideration paid, satisfied in cash					3.1
Cash acquired					(1.0)
NET CASH OUTFLOW ARISING ON ACQUISITION					2.1
Expenses included in consideration above were not material
Revenue for the year to 30 September 2008					Nil
Profit/(loss) from the date of acquisition to 30 September 2008					(0.5)
Profit/(loss) for the year to 30 September 2008					(0.5)
Date of acquisition	11 Oct 2007	4 Aug 2008
Percentage of issued share capital acquired	55.60%	6.37%
On acquisition of	Kwikbuild Corporation Limited	Kwikbuild Corporation Limited

 

8 Gain on sale of intangible asset

2009

There were no sales of intangible assets during the year.

2008

During 2008 LonZim Plc was established and was listed on AIM in December 2007 raising £29.0 million to invest in opportunities in Zimbabwe and those related to the Zimbabwean economy.

Lonrho Plc, on behalf of itself and its subsidiaries or companies in which Lonrho has significant influence over the Board, has agreed not to make investments in Zimbabwe, or an area in Mozambique known as the Beira Corridor. In consideration of entering into this agreement, the Company received a free carry interest of 20% of the issued share capital of LonZim Plc, valued at £7.3 million which resulted in a £5.8 million credit to the 2008 consolidated income statement. LonZim Plc is accounted for as an associate using the equity method (see note 17).

9 Discontinued operations SAILS

Following a review by the Board in September 2008, the Group decided not to continue to support SAILS. The Board began actively marketing the company for sale prior to the 2008 year end. Unfortunately this proved unsuccessful and the company was placed into liquidation on 15 October 2008.

Goodwill totalling £5.1 million and £2.1 million of deferred tax assets were charged to the income statement in 2008. The remaining assets and liabilities of SAILS were transferred to assets and liabilities classified as held for sale as at 30 September 2008.

2008

Note £m

Property, plant and equipment 15 0.1

Trade and other receivables 2.4

Cash and cash equivalents 0.1

2008 £m

Other financial liabilities 2.0

Bank overdraft 0.5

Trade and other payables 5.8

2009* 2008

£m £m

Net cash used in operating activities (0.1) (21.8)

Net cash received from financing activities by the Group - 22.0

* In the period to liquidation.

 

10 Staff numbers and costs

The aggregate remuneration comprised (including Executive Directors)

		Group		Company
		2009  £m	2008  £m	2009 £m	2008 £m
Wages and salaries		11.6	9.5	2.5	2.3
Compulsory social security contributions		1.1	0.4	0.2	0.2
Share based payments		0.3	-	0.3	-
		13.0	9.9	3.0	2.5
The average number of employees (including Executive Directors) was:
	Group			Company
	2009 Number		2008 Number	2009 Number	2008 Number
Infrastructure	183		181	-	-
Agribusiness	217		-	-	-
Transport	300		217	-	-
Support services	88		82	-	-
Hotels	161		136	-	-
Cargo and shipping (discontinued operations)	-		16	-	-
Central	21		18	21	18
	970		650	21	18

 

2009 2008

£m £m

The highest paid Director received emoluments of £0.542 million (2008: £0.542 million).

11 Net finance costs

	2009 £m	2008 £m
Bank interest receivable Foreign exchange gain	0.2 6.4	0.6 6.0
FINANCE INCOME	6.6	6.6
Loans repayable within five years and overdrafts	0.9	0.2
Foreign exchange loss	0.2	2.4
Finance leases	0.1	0.1
Impairment of investments (note 18)	-	0.8
FINANCE EXPENSE	1.2	3.5
NET FINANCE INCOME	5.4	3.1

 

Included within the above is loan interest payable of £Nil (2008 £0.3 million) and foreign exchange losses of £Nil (2008 £2.4 million) relating to discontinued operations.

 

The foreign exchange gain of £6.4 million (2008£6.0 million) has arisen on the translation of intercompany balances at the year end rate.

 

12 Income tax expense

Recognised in the income statement	2009 £m	2008  £m
CURRENT TAX EXPENSE Current year	0.8	0.2
DEFERRED TAX EXPENSE   Write off of asset in respect of discontinued operation (note 9)	-	2.1
TOTAL INCOME TAX EXPENSE IN THE INCOME STATEMENT	0.8	2.3
Reconciliation of effective tax rate	2009 £m	2008 £m

 

Loss before tax		(4.5)	(38.7)
Income tax using the domestic corporation tax rate		(1.2)	(11.2)
Effect of tax rates in foreign jurisdictions		(0.5)	(0.3)
Provision against carrying value of associate		-	1.2
Net losses where no Group relief is available		3.8	10.5
Write off of deferred tax asset in respect of discontinued operations (note 9)		-	2.1
Gain on disposal of subsidiary undertaking not tax affected		(0.7)	1.5
Effect of tax losses utilised		(0.3)	(1.7)
Non taxable items		(0.3)	-
Impairment of investments	-		0.2
TOTAL TAX EXPENSE		0.8	2.3

2009 2008

Deferred tax recognised directly in equity £m £m

UK Corporation tax is calculated at a rate of 28% (2008: 29%) of the estimated assessable loss for the year. Taxation for other jurisdictions is calculated at the rates prevailing in the respective jurisdictions.

13 Earnings per share

The calculation of the basic and diluted loss per share is based on the following data

2009 2008

£m £m

equity holders of the parent (6.2) (33.3)

Number of shares (millions) 2009 2008

 

No. No.

 

Weighted average number of ordinary shares for the purposes of basic earnings per share	715.7	371.2
Effect of dilutive potential ordinary shares:
- Share options	37.5	27.5
Weighted average number of ordinary shares for the purposes of diluted earnings per share*	753.2	398.7

 

\* The calculation of diluted loss per share is based on the weighted average number of shares outstanding as in respect of both the current and prior year the Group has made a loss and hence the effect of share options is considered to be anti-dilutive.

14 Intangible assets

	Goodwill £m	Customer relationships £m	Brands £m	Intellectual property £m	Licences £m	Total £m
COST
Balance at 1 October 2007	6.5	-	1.0	0.1	0.2	7.8
Acquired through business combinations	1.5	-	-	-	-	1.5
Increase in shareholding of subsidiary undertaking	2.8	-	-	-	-	2.8
BALANCE AT 30 SEPTEMBER 2008	10.8	-	1.0	0.1	0.2	12.1
Balance at 1 October 2008	10.8	-	1.0	0.1	0.2	12.1
Acquired through business combinations	9.1	3.2	-	-	-	12.3
Discontinued business	(5.1)	-	-	-	-	(5.1)
Increase in shareholding of subsidiary undertaking	-	-	-	-	-	-
BALANCE AT 30 SEPTEMBER 2009	14.8	3.2	1.0	0.1	0.2	19.3
AMORTISATION AND IMPAIRMENT LOSSES
Balance at 1 October 2007	-	-	0.1	-	-	0.1
Amortisation for the year	-	-	0.2	-	0.1	0.3
Impairment charge	5.7	-	0.1	-	-	5.8
BALANCE AT 30 SEPTEMBER 2008	5.7	-	0.4	-	0.1	6.2
Balance at 1 October 2008	5.7	-	0.4	-	0.1	6.2
Amortisation for the year	-	0.3	0.2	-	0.1	0.6
Discontinued business	(5.1)	-	-	-	-	(5.1)
Impairment charge	-	-	-	-	-	-
BALANCE AT 30 SEPTEMBER 2009	0.6	0.3	0.6	-	0.2	1.7
CARRYING AMOUNTS
At 1 October 2007	6.5	-	0.9	0.1	0.2	7.7
AT 30 SEPTEMBER 2008	5.1	-	0.6	0.1	0.1	5.9
At 1 October 2008	5.1	-	0.6	0.1	0.1	5.9
AT 30 SEPTEMBER 2009	14.2	2.9	0.4	0.1	-	17.6

 

 

Amortisation and impairment charge

The amortisation and impairment charge is recognised in the operating costs line of the income statement, with the exception of the goodwill relating to discontinued operations which has been disclosed separately.

Goodwill acquired in a business combination is allocated at acquisition to the cash generating units (CGU's) that are expected to benefit from that business combination. Before recognition of impairment losses, the carrying amount of goodwill had been allocated as follows:

Primary Reporting Segment	CGU	2009 £m	2008 £m
AGRIBUSINESS	Rollex Pty Limited	7.8	-
		7.8	-
INFRASTRUCTURE	Luba Freeport Limited	3.5	3.5
	KwikBuild Corporation Limited	2.8	1.5
		6.3	5.0
TRANSPORT	Five Forty Aviation Limited	0.1	0.1
	SA Independent Liner Services Pty Limited - (SAILS)	-	5.1
		0.1	5.2
SUPPORT SERVICES	Swissta Holdings Limited	0.6	0.6
TOTAL		14.8	10.8

 

At 30 September 2009 accumulated impairment losses in respect of goodwill totalled £0.6million (2008: £5.7 million).

The Group tests goodwill annually for impairment, or more frequently if there are indications that goodwill might be impaired which include the current economic environment. The recoverable amounts are determined from value in use calculations. The key assumptions for the value in use calculations are those regarding discount rates, growth rates, expected changes to selling prices and direct costs during the period.

Management estimates discount rates using pre-tax rates that reflect current market assessments of the time value of money and the risks specific to the units. The growth rates are based on management's assessment of the markets in which the businesses are operating and reflect known contracts and customer relationships combined with anticipated growth in markets and market share. Industry growth forecasts are not always considered applicable as many of the businesses are operating in non-established markets. Changes in the selling prices and direct costs are based on past practices and expectations of future changes in the market.

The Group prepares cash flow forecasts derived from the most recent financial budgets included in the individual reporting unit's five year business plan which are approved by management. For Rollex Pty Limited and KwikBuild Corporation Limited the Directors have not considered cashflow beyond the five year period in determining value in use. For Luba Freeport Limited, reflecting the significant capital investments in the project and the length of the remaining operating concession (19 years) the Directors have extended the forecast for a further five years using a 5% growth rate over this period in determining value in use. The pre-tax rates used to discount the forecast cash flows within Agribusiness are Rollex Pty Limited 12%, Infrastructure, are Luba Freeport Limited 10% (2008: 10%) and KwikBuild Corporation Limited 15% (2008: 15%), Transport, being Five Forty Aviation Limited 15% (2008: 15%), and Support Services being Swissta Holdings Limited 15% (2008: 15%).

Management carried out a range of sensitivity analysis on all the assumptions used for Rollex Pty Limited, Luba Freeport Limited and KwikBuild Corporation Limited. The results of this analysis confirmed that there was sufficient headroom in the carrying value of goodwill for these entities. The Directors do not consider that any reasonably possible scenario currently forseen could result in goodwill impairment.

On 30 September 2008, before impairment testing, goodwill of £5.1 million was allocated to SAILS within the cargo and shipping segment. This goodwill was fully impaired at that date. See note 9 for further details. The assets and liabilities of SAILS were classified as held for sale as at 30 September 2008. On 15 October 2008 SAILS was put into liquidation.

On 30 September 2008, before impairment testing, goodwill of £0.6 million was allocated to Swissta Holdings Limited within the support services segment. Due to the economic environment in the sector in which the company operates, the Group revised its cash flow forecasts, and the goodwill was fully impaired at that date.

Other intangible assets

The Group tests other intangible assets for impairment if there are indications that they might be impaired. The carrying value of intangible assets held by Swissta Holdings Limited totalling £0.1 million, have been fully impaired for the reasons described above.

Estimates and judgements

The Directors believe that the estimates and judgements used in preparing these financial statements would not have a material impact on the carrying values of the intangible assets described above.

15 Property, plant and equipment

	Long leasehold land  and buildings £m	Short leasehold land and buildings £m	Plant and machinery £m	Fixtures and fittings £m	Aircraft £m	Total  £m
COST
Balance at 1 October 2007	3.9	27.6	4.1	1.4	4.5	41.5
Additions	0.6	8.1	0.7	1.6	1.5	12.5
Revaluations	4.6	-	-	-	-	4.6
Disposals	-	-	-	(0.3)	-	(0.3)
Transfer to current assets held for sale (note 9)	-	-	-	(0.1)	-	(0.1)
Effect of movements in foreign exchange	0.9	4.0	0.7	0.1	0.6	6.3
BALANCE AT 30 SEPTEMBER 2008	10.0	39.7	5.5	2.7	6.6	64.5
Balance at 1 October 2008	10.0	39.7	5.5	2.7	6.6	64.5
Additions	7.1	3.6	1.0	1.5	1.5	14.7
Business combinations	0.7	-	2.4	-		3.1
Disposals	-	-	(1.2)	(0.2)	(3.2)	(4.6)
Effect of movements in foreign exchange	(0.7)	4.1	0.8	0.4	0.4	5.0
BALANCE AT 30 SEPTEMBER 2009	17.1	47.4	8.5	4.4	5.3	82.7

 

	Long  leasehold land  and buildings £m	Short leasehold land and buildings £m	Plant and machinery £m	Fixtures and fittings £m	Aircraft £m	Total £m
DEPRECIATION AND IMPAIRMENT LOSSES
Balance at 1 October 2007	0.1	2.5	0.9	1.0	0.1	4.6
Depreciation charge for the year	0.1	1.6	0.6	0.3	0.5	3.1
Depreciation written back on revaluation	(0.3)	-	-	-	-	(0.3)
Disposals	-	-	-	(0.3)	-	(0.3)
Effect of movements in foreign exchange	0.1	0.3	0.1	0.1	-	0.6
BALANCE AT 30 SEPTEMBER 2008	-	4.4	1.6	1.1	0.6	7.7
Balance at 1 October 2008	-	4.4	1.6	1.1	0.6	7.7
Depreciation charge for the year	0.5	1.9	1.6	0.6	0.7	5.3
Disposals	-	-	-	(0.1)	(0.8)	(0.9)
Effect of movements in foreign exchange	0.2	0.2	0.2	-	0.2	0.8
BALANCE AT 30 SEPTEMBER 2009	0.7	6.5	3.4	1.6	0.7	12.9
CARRYING AMOUNTS
At 1 October 2007	3.8	25.1	3.2	0.4	4.4	36.9
At 30 September 2008	10.0	35.3	3.9	1.6	6.0	56.8
At 1 October 2008	10.0	35.3	3.9	1.6	6.0	56.8
At 30 September 2009	16.4	40.9	5.1	2.8	4.6	69.8

 

Leased plant, machinery and aircraft

The Group leases an aircraft under a finance lease agreement. At the end of the lease, providing all payments have been made, title to the asset passes to the Group. At 30 September 2009, the net carrying amount of leased assets were £1.5 million (2008:

£1.5 million). See note 24 for details of the lease obligations.

Revalued long leasehold land and buildings

Long leasehold land and buildings, relating to Hotel Cardoso SARL and Sociedade Comercial Bytes & Pieces Limitada, were revalued in June 2008 and January 2009 respectively, by Zambujo & Associados Lda, independent valuers, on the basis of market value. The valuations conform to International Valuation Standards and were based on recent market transactions at arm's length terms for similar properties. The Directors believe these valuations remain appropriate and accordingly have not commissioned new valuations since January 2009.

On 30 September 2009, had long leasehold land and buildings been carried at historical cost less accumulated depreciation, their carrying amount would be approximately £2.0 million (2008: £2.1 million). The revaluation surplus is disclosed in note 23. The revaluation surplus arises in a subsidiary and cannot be distributed to the parent due its legal restrictions in the country of incorporation.

Assets in the course of construction

Included within short leasehold land and buildings are assets in the course of construction totalling £8.3 million (2008: £5.7 million) which are not depreciated until they are brought into use.

Capital commitments

Details of capital commitments in relation to property, plant and equipment are disclosed in note 31.

Borrowing costs

The amount of borrowing costs in respect of interest capitalised during the year was £0.3 million (2008: £0.4 million) and has been included within long leasehold land and buildings.

 

16 Investments in subsidiaries

The investment by the Company in respect of Lonrho Africa (Holdings) Limited is stated at cost. This is subject to impairment testing.

A list of principal subsidiaries is set out in note 34.

 

17 Investments in associates and joint ventures

	Group			Company
	2009 £m	2008 £m		2009 £m	2008 £m
At 1 October	8.8		-	7.3	-
Free carry interest received (see note 8)	-		5.8	-	7.3
Acquisition of joint venture	1.5		-	-	-
Share of net assets on acquisition	-		3.5	-	-
Transfer to business acquisitions (see note 7)	(2.2)		-	-	-
Transfer from other non-current investments (see note 18)	-		3.5	-	-
Additions to associates	0.9		-	0.4	-
Shares of loss after taxation - joint ventures	(0.2)		-	-	-
Share of profit after taxation - associates	0.4		(4.0)	-	-
AT 30 SEPTEMBER	9.2		8.8	7.7	7.3
The acquisition of joint ventures relates to the investment of £1.5 million in Grand Karavia, a company based in the DRC. Additions to associates represents the purchase of additional shares in Lonzim Plc (see note 33).

 

The Group had the following investments in associates and joint ventures at the balance sheet date:

 

Ownership of

Country ordinary share capital

2009 2008

E-KwikBuild Pty Limited + + South Africa - 30.37%

Lonrho Mining Limited South Africa 25.32% 24.16%

Arlington Associates Limited UK 20.00% 20.00%

 

Joint Ventures

 

+ Held directly by Lonrho Plc.

+ + KwikBuild Corporation Limited (note 7) holds 51% of the share capital (2008:49%). The Group obtained Board control of this investment with effect from 1 October 2008 and accordingly has treated this entity as a subsidiary from that date.

 

Lonrho Mining Limited

Lonrho Mining Limited was presumed not to be an associate in 2007 due the Group not being able to exercise significant influence over the company. As a result of a change in the Board of Lonrho Mining Limited in September 2008, this was no longer the case and hence it was reclassified from other non-current asset investments with effect from this date.

The value of the Group's investment in Lonrho Mining Limited was impaired by £4.0 million in the prior period, to reflect the fall in the value of the shares on the Australian Securities Exchange. The impairment loss was included in share of loss after taxation. The recoverable amount of the asset has been assessed at 30 September 2009 by reference to its value in use.

 

17 Investments in associates and joint ventures (continued) Summary financial information on associates and joint ventures (100%)

Revenues Profit/(loss)

for the for the year/period year/period

from from

Assets Liabilities Equity acquisition acquisition

£m £m £m £m £m

 

2009
Associates
LonZim Plc*	37.4	(3.9)	33.5	2.6	1.2
Lonrho Mining Limited	2.7	(2.5)	0.2	-	0.7
Arlington Associates Limited	0.1	-	0.1	-	(0.3)
	40.2	(6.4)	33.8	2.6	1.6
Joint ventures
Grand Karavia SARL	2.6	-	2.6	-	0.4

2008
LonZim Plc*	35.8	(2.3)	33.5	0.2	(1.2)
Lonrho Mining Limited	1.4	(1.9)	(0.5)	-	-
E-KwikBuild Housing (Pty) Limited	0.7	(0.6)	0.1	2.2	0.1
Arlington Associates Limited	0.4	-	0.4	-	-
	38.3	(4.8)	33.5	2.4	(1.1)

 

* The reported LonZim profit is adjusted to exclude amortisation of the element of the non-compete agreement not recognized in these accounts on formation of LonZim.

The market value of the Group's investment in Lonzim Plc at 30 September 2009 was £2.2 million (2008: £5.5 million). The entity's year end is 31 August and it was incorporated on 25 October 2007. It was listed on the AIM market of the London Stock Exchange on11 December 2007 whereby Lonrho Plc received 20% of the shares in exchange for a non-compete agreement in Zimbabwe and the Beira corridor of Mozambique (see note 8).  At 26 February 2010 the market value of the Group's investment in LonZim Plc was £3.2 million.

Estimates and judgements

The Directors use estimates when assessing the carrying value of the Group's investments in associates and joint ventures. In assessing the carrying value of these investments, the Directors consider a number of sources of information including financial forecasts prepared by management and market information where available. In considering impairment risks, the Directors have regard to the quoted share price of Lonrho Mining Limited and LonZim Plc. Management forecasts have been used to assess whether impairment of the Group's other investments in associates and joint ventures was necessary. Taking all of these factors into account, including the early stage of development of these businesses, whilst the carrying value of these interests exceed their quoted market values at 30 September 2009 the Directors do not consider these investments impaired.

The Directors believe the estimates and judgements used in preparing the financial statements of associates and joint ventures do not have a material impact on the carrying values of investments described above. Where associates and joint ventures do not have 30 September as their year end the most recent audited financial statements, adjusted as appropriate to align with the Lonrho year end, are used for consolidation purposes.

18 Other investments

	2009 £m	2008 £m
At 1 October	0.7	5.0
Transfer to associate (see note 17)	-	(3.5)
Impairment charge	(0.1)	(0.8)
AT 30 SEPTEMBER	0.6	0.7

 

These investments present the Group with opportunity for return through dividend income and trading gains. None are traded on active equity markets. They have no fixed maturity or coupon rate. The fair values, and carrying values, of these investments are stated at cost less provisions for impairment.

The Directors consider the fair value of these investments is equal to their book value. The impairments are based on a review of the company's net assets and prospects.

The Group holds 20.0% of the share capital of Swissta RDC SpRL. The Group does not equity account for this entity because it has no representation on the Board of Swissta RDC SpRL and is unable to exert significant influence over the business. The carrying value of Swissta RDC SpRL at the balance sheet date is £0.1 million (2008: £0.1 million).

Other investments are classified as available-for-sale financial assets.

19 Deferred tax assets and liabilities Recognised deferred tax assets and liabilities

	Assets		Liabilities
	2009 £m	2008 £m	2009 £m	2008 £m
At 1 October	-	2.2	1.7		0.7
Acquisition of intangible assets from acquisition of subsidiaries	-	-	1.0		-
Revaluation of property, plant and equipment	-	-	-		1.0
Tax losses related to discontinued operations (note 9)	-	(2.1)	-		-
Exchange differences	-	(0.1)	0.3		-
AT 30 SEPTEMBER	-	-	3.0		1.7

 

The deferred tax liability at 30 September 2009 and 2008 related to the revaluation of property, plant and equipment and recognized intangible assets.

 

There have been no deferred tax assets and liabilities off-set in the current or proceeding period.

Unrecognised deferred tax assets

Deferred tax assets have not been recognised in respect of tax losses totalling £4.1 million (2008: £0.6 million) due to uncertainty against the ability to deduct these losses against future profits.

 

20 Inventories

2009 2008

£m £m

Raw materials and consumables	0.9	0.7
Finished goods	2.5	1.5
	3.4	2.2

 

In 2009 raw materials, consumables and changes in work in progress and finished goods recognised as cost of sales amounted to £5.7 million (2008: £4.2 million).

 

21 Trade and other receivables

	Group		Company
	2009 £m	2008 £m	2009 £m		2008 £m
Amounts receivable from the sale of goods and services	18.6	2.6	-	-
Trade receivables due from associates	-	0.3	-	-
Other receivables	7.8	7.2	0.5	0.1
Pre-payments and accrued income	6.0	1.5	-	-
Amounts owed by Group undertakings	-	-	55.8	45.3
	32.4	11.6	56.3	45.4

 

The average credit period taken on sales of goods is 66.1 days (2008: 19.1 days). No interest is charged on receivables.

The Directors consider the carrying amount of trade and other receivables for the Group and Company approximates to their fair value.

2009 2008

Movement in the allowance for doubtful debts £m £m

Amounts written off during the year -  (0.6)

Increase in allowance recognised in the income statement 0.2 0.7

 

The amount written off in 2008 relates to SAILS, a discontinued operation.

Refer to note 29 for further information on credit risk management.

22 Cash and cash equivalents

 

	Current assets/(liabilities) Held for sale 2009			Current assets/ (liabilities) 2009		Total 2009		Current assets/ (liabilities) Held for sale 2008		Current Assets/ (liabilities) 2008		Total 2008
		£m	£m			£m	£m			£m	£m
Bank balances		-	6.9			6.9	0.1			10.2	10.3
Bank overdrafts		-	(0.9)			(0.9)	(0.5)			(0.4)	(0.9)
CASH AND CASH EQUIVALENTS IN THE STATEMENT  OF CASH FLOWS		-	6.0			6.0			(0.4)	9.8	9.4

 

23 Capital and reserves

Group reconciliation of movement in capital and reserves

Attributable to equity holders of the parent

	Share capital £m	Share premium £m	Translation reserve £m	Share option reserve £m	Revaluation reserve £m	Retained  earnings £m	Total £m	Minority interest £m	Total equity £m
At 1 October 2007	2.8	33.2	0.2	2.2	1.6	1.1	41.1	1.6	42.7
Share capital issued	1.8	58.1	-	-	-	-	59.9	-	59.9
Subsidiaries acquired	-	-	-	-	-	-	-	3.8	3.8
Revaluation	-	-	-	-	2.9	-	2.9	2.0	4.9
Loss for the period	-	-	-	-	-	(33.3)	(33.3)	(7.7)	(41.0)
Deferred tax	-	-	-	-	-	(0.8)	(0.8)	(0.2)	(1.0)
Foreign exchange translation	-	-	(0.2)	-	-	-	(0.2)	0.6	0.4
AT 30 SEPTEMBER 2008	4.6	91.3	-	2.2	4.5	(33.0)	69.6	0.1	69.7
At 1 October 2008	4.6	91.3	-	2.2	4.5	(33.0)	69.6	0.1	69.7
Share capital issued	3.4	13.4	-	-	-	-	16.8	-	16.8
Share options issued	-	-	-	0.3	-	-	0.3	-	0.3
Subsidiaries acquired	-	-	-	-	-	-	-	0.2	0.2
Subsidiaries sold	-	-	-	-	-	-	-	2.9	2.9
Transfer (note 7)	-	-	-	-	-	-	-	(0.7)	(0.7)
Profit/(Loss) for the period	-	-	-	-	-	(6.2)	(6.2)	0.9	(5.3)
Deferred tax	-	-	-	-	-	-	-	-	-
Foreign exchange translation	-	-	(2.0)	-	(0.4)	-	(2.4)	(0.4)	(2.8)
AT 30 SEPTEMBER 2009	8.0	104.7	(2.0)	2.5	4.1	(39.2)	78.1	3.0	81.1

 

Share capital and share premium

Ordinary shares

In millions of 1p shares	2009	2008
On issue at 1 October	454.9	277.1
Issued for cash	344.2	177.8
ON ISSUE AT 30 SEPTEMBER - FULLY PAID	799.1	454.9

 

At 30 September 2009, the authorised share capital comprised 1,100,000,000 ordinary shares (2008: 550,000,000) of 1p each. An increase of 350,000,000 took place on 9 December 2008 and a further increase of 200,000,000 took place on 30 April 2009. Refer to note 35 for details of share issues after the year end.

During 2009, the Company issued 308.9 million and 35.3 million shares at prices of 5p and 7p respectively (2008 44.7 million, 56.9 million and 76.2 million at prices of 38p, 43p and 26p respectively). The costs of the share issues of £1.1 million (2008 £1.4 million) have been deducted from the share premium created on issue.

The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company. All shares rank equally with regard to the Company's residual assets.

The Group also issued share options in 2009 (see note 26).

 

Company reconciliation of movement in capital and reserves

	Share capital £m	Share premium £m	Share option reserve £m	Retained earnings £m	Total £m
At 1 October 2008	2.8	33.2	2.2	(7.1)	31.1
Share capital issued	1.8	58.1	-	-	59.9
Equity settled transactions	-	-	-	-	-
Loss for the period	-	-	-	(7.2)	(7.2)
AT 30 SEPTEMBER 2008	4.6	91.3	2.2	(14.3)	83.8
At 1 October 2008	4.6	91.3	2.2	(14.3)	83.8
Share capital issued	3.4	13.4	-	-	16.8
Equity settled transactions	-	-	0.3	-	0.3
Loss for the period	-	-	-	(7.0)	(7.0)
AT 30 SEPTEMBER 2009	8.0	104.7	2.5	(21.3)	93.9

 

Translation reserve

The translation reserve comprises all foreign exchange differences arising from the translation of the financial statements of foreign operations since the conversion to Adopted IFRS on 1 October 2006.

Revaluation reserve

The revaluation reserve relates to property, plant and equipment (see note 15).

Share based payment reserve

The share based payment reserve comprises the charges arising from the calculation of the share based payments posted to the income statement (see note 26).

 

24 Interest-bearing loans and borrowings

This note provides information about the contractual terms of the Group's interest-bearing loans and borrowings. For more information about the Group's exposure to interest rate and foreign currency risk, see note 29.

 

 

	2009 £m	2008 £m
NON-CURRENT LIABILITIES
Finance lease liabilities	1.1	1.1
Unsecured bank loans	5.2	-
Shareholder loans	7.3	-
Other loans	2.8	-
	16.4	1.1
CURRENT LIABILITIES
Unsecured bank loans	1.2	3.0
Convertible loan note	0.3	0.3
Current portion of finance lease liabilities	0.2	0.2
	1.7	3.5

 

Finance leases

Finance lease liabilities are denominated in US dollars and are payable as follows:

2009 2008

Future Present value Future Present value

minimum of minimum minimum of minimum

lease lease lease lease

payments Interest payments payments Interest payments

£m £m £m £m £m £m

 

Less than one year	0.3	(0.1)	0.2	0.3	(0.1)	0.2
Between one and five years	1.2	(0.1)	1.1	1.2	(0.1)	1.1
	1.5	(0.2)	1.3	1.5	(0.2)	1.3

Interest is payable on the leases at 9.9% per annum. Under the terms of the lease agreements, no contingent rents are payable.

Convertible loan note

The UK sterling loan note is held by a minority shareholder in KwikBuild Corporation Limited. It is convertible to 6.7% of the ordinary share capital of that company at any time after 1 October 2008 at the option of the minority. Interest is charged at 8% per annum and there is no repayment date for the loan. The carrying value approximates to the fair value. See note 35 for events arising after 30 September 2009.

 

Bank Loans

The Group has one principal bank loan of £ 5.4 million (2008 £3.0 million) denominated in Central African Franc. The loan is repayable on demand. The loan is due to be repaid by January 2013 and carries an interest rate of 12% (2008 12%). The remaining bank losses are denominated in US$ and carry an interest rate of 2.8% (2008 Nil).

 

Shareholder and other loans

Shareholder and other loans are denominated in South African Rand.

 

 

Bank overdrafts

Bank overdrafts are repayable on demand and are unsecured. The currency profile is as follows:

	2009 £m	2008  £m
Central African Franc US Dollar Sterling	0.1 0.1 0.7	0.2 0.2 -
	0.9	0.4
The weighted average interest rates paid were 12% (2008:12%) The Directors consider the carrying amount of the Group's loans and borrowings approximates their fair value.

 

25 Interest bearing loans

2009 2008

£m £m

At 30 September 2009 there were 37,505,000 (2008: 27,505,000) share options in issue with an average exercise price of 10.8p (2008: 31.9p).

The following share options over 1p ordinary shares were granted under an Unapproved Share option scheme on 13 January 2009.

Name	Date granted	Number of share optionsgranted	Exercise  Price	Period during which exercisable	Market price per share at date of  grant or modification
David Lenigas	13.01.2009	2,500,000	6.5p	13.01.2009 - 12.01.2014	5.8p
Emma Priestley	13.01.2009	1,000,000	6.5p	13.01.2009 - 12.01.2014	5.8p
Geoffrey White	13.01.2009	2,000,000	6.5p	13.01.2009 - 12.01.2014	5.8p
Donald Strang	13.01.2009	500,000	6.5p	13.01.2009 - 12.01.2014	5.8p
Frances Cook	13.01.2009	500,000	6.5p	13.01.2009 - 12.01.2014	5.8p
Jean Ellis	13.01.2009	500,000	6.5p	13.01.2009 - 12.01.2014	5.8p
David Armstrong	13.01.2009	1,000,000	6.5p	13.01.2009 - 12.01.2014	5.8p
Other employees and consultants	13.01.2009	2,000,000	6.5p	13.01.2009 - 12.01.2014	5.8p
Total options in issue		10,000,000

 

The following options over 1p ordinary shares granted under an Unapproved Share option scheme were outstanding at 30 September 2009.

Name	Date granted	Number of share optionsgranted	Exercise  Price	Period during which exercisable	Market price per share at date of grant or modification
David Lenigas*	25.01.2006	3,500,000	6.5p	25.01.2006 - 24.01.2011	5.8p
Emma Priestley*	11.04.2006	1,250,000	6.5p	11.04.2006 - 10.04.2011	5.8p
James Hughes*	25.01.2006	1,000,000	6.5p	25.01.2006 - 24.01.2011	5.8p
Other employees and consultants	30.03.2006	1,500,000	17.0p	30.03.2006 - 29.04.2011	15.0p
David Lenigas*	30.04.2007	3,750,000	6.5p	30.04.2007 - 29.04.2012	5.8p
Emma Priestley*	30.04.2007	1,250,000	6.5p	30.04.2007 - 29.04.2012	5.8p
Geoffrey White*	30.04.2007	2,500,000	6.5p	30.04.2007 - 29.04.2012	5.8p
Donald Strang*	30.04.2007	500,000	6.5p	30.04.2007 - 29.04.2012	5.8p
Martin Horgan	30.04.2007	1,000,000	34.5p	30.04.2007 - 29.04.2012	32.5p
James Hughes*	30.04.2007	750,000	6.5p	30.04.2007 - 29.04.2012	5.8p
Gerard Holden	30.04.2007	3,500,000	34.5p	30.04.2007 - 29.04.2012	32.5p
Other employees and consultants	30.04.2007	290,000	34.5p	30.04.2007 - 29.04.2012	32.5p
Other employees and consultants	30.04.2007	1,520,000	6.5p	30.04.2007 - 29.04.2012	5.8p
David Lenigas*	20.07.2007	1,615,000	6.5p	20.07.2007 - 19.07.2012	5.8p
Emma Priestley*	20.07.2007	1,065,000	6.5p	20.07.2007 - 19.07.2012	5.8p
Geoffrey White*	20.07.2007	1,065,000	6.5p	20.07.2007 - 19.07.2012	5.8p
Donald Strang*	20.07.2007	200,000	6.5p	20.07.2007 - 19.07.2012	5.8p
Martin Horgan	20.07.2007	200,000	44.0p	20.07.2007 - 19.07.2012	39.5p
James Hughes*	20.07.2007	350,000	6.5p	20.07.2007 - 19.07.2012	5.8p
Jean Ellis*	20.07.2007	350,000	6.5p	20.07.2007 - 19.07.2012	5.8p
Other employees and consultants	20.07.2007	100,000	44.0p	20.07.2007 - 19.07.2012	39.5p
Other employees and consultants*	20.07.2007	250,000	6.5p	20.07.2007 - 19.07.2012	5.8p
David Lenigas	13.01.2009	2,500,000	6.5p	13.01.2009 - 12.01.2014	5.8p
Emma Priestley	13.01.2009	1,000,000	6.5p	13.01.2009 - 12.01.2014	5.8p
Geoffrey White	13.01.2009	2,000,000	6.5p	13.01.2009 - 12.01.2014	5.8p
Donald Strang	13.01.2009	500,000	6.5p	13.01.2009 - 12.01.2014	5.8p
Frances Cook	13.01.2009	500,000	6.5p	13.01.2009 - 12.01.2014	5.8p
Jean Ellis	13.01.2009	500,000	6.5p	13.01.2009 - 12.01.2014	5.8p
David Armstrong	13.01.2009	1,000,000	6.5p	13.01.2009 - 12.01.2014	5.8p
Other employees and consultants	13.01.2009	2,000,000	6.5p	13.01.2009 - 12.01.2014	5.8p
Total options issued		37,505,000

 

 

* The exercise price was amended to 6.5p on 13 January 2009.

 

In accordance with IFRS 2 'Share-based payments' share options granted or re-priced during the year have been measured at fair value at the date of grant or re-pricing and, in the case of re-priced options, the increase in the fair value compared with the value of the original award at that date has been recognised as an expense in the income statement with a corresponding increase in equity. The fair value of the options granted has been estimated at the date of grant using the Black-Scholes option-pricing model. The estimated fair value of the options granted on 13.01.09 was £0.2 million. The estimated fair value of the options re-priced on 13 January 2009 was £0.1 million.

 

	Date of Grant
	13.01.2009	30.04.2007	20.07.2007
Share price	5.8p	32.5p	39.5p
Exercise price	6.5p	34.5p	44.0p
Expected volatility	49.0%	45.3%	45 .30%
Expected life*	2.5 years	2.5 years	2.5 years
Expected dividends	0.00%	0.00%	0.00%
Risk-free interest rate	5.50%	5.50%	5.50%

 

* The expected life used for re-priced options is 1 year reflecting the shorter remaining life of these options

Volatility has been calculated by reference to the movement of the Company's share price over the previous three and a half years.

All share options vest at the date of grant and the basis of settlement is in shares of the Company.

27 Trade and other payables

Group Company

	2009 £m	2008 £m	2009  £m	2008 £m
Trade payables	21.1	5.6	-	-
Amounts owed to Group undertakings	-	-	0.4	0.4
Indirect tax and social security liabilities	0.4	1.9	-	-
Deferred income	4.0	-	-	-
Non-trade payables and accrued expenses	11.0	6.3	0.5	-
	36.5	13.8	0.9	0.4

 

Trade payables principally comprise outstanding amounts for trade purchases and on-going costs. The average credit period taken for trade purchases is 45 days (2008 47 days).The Directors consider that the carrying amount of trade payables approximates to their fair value. The number of days billing outstanding for the Company at the year end is 31 days (2008: Nil).

28 Notes to the cash flow statement

	2009 £m	Group   2008 £m	Company   2009 2008 £m £m
Depreciation of property, plant and equipment Amortisation of intangible assets Impairment of goodwill and other intangible assets	5.3 0.6 -	3.1 0.3 5.8	- - - - - -
Share based payment expense	0.3	-	0.3 -
Finance income	(5.4)	(3.9)	- -
Share of profit of associates	(0.2)	-	- -
Impairment/write off of goodwill and investment in associate	-	4.0	- -
Gain on disposals of assets/liabilities held for sale	(2.2)	-	- -
Impairment/loss on disposal of investments	-	0.8	- -
Gain on sale of intangible fixed asset	0.1	(5.8)	- -
Income tax expense	0.8	2.3	- -
ADJUSTMENTS TO LOSS FOR THE YEAR	(0.7)	6.6	0.3 -

 

29 Financial instruments

The Company has no financial assets apart from the other receivable amounts owed by and to Group undertakings included within note 21. The Company applies a similar approach to credit risk management as the Group. The Directors believe that there were no significant credit risks to the Company.

Exposure to credit, liquidity, interest rate and currency risks arises in the normal course of the Group's business.

This note presents information about the Group's exposure to each of the above risks, the Group's objectives, policies and processes for measuring and managing risk, and the Group's management of capital which the Directors consider to be the components of Total Equity excluding minority interests as identified on page 19. Further quantitative disclosures are included throughout these consolidated financial statements. The Board of Directors have overall responsibility for the establishment and oversight of the Group's risk management framework.

Credit risk management

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. The Group has adopted a policy of only dealing with credit worthy counterparties and obtaining sufficient collateral where appropriate, as a means of mitigating the risk of financial loss from defaults. No collateral is held at the year end. The Group's exposure and the credit ratings of its counterparties are continuously monitored and the aggregate value of transactions concluded is spread amongst approved counterparties.

Trade receivables consist of a large number of customers, spread across diverse industries and geographical areas. Ongoing credit evaluation is performed on the financial condition of accounts receivable. The Group does not have any significant credit risk exposure to any single counterparty or any Group of counterparties having similar characteristics. The credit risk on liquid funds is limited because the counterparties are banks with high credit- ratings assigned by international credit rating agencies.

The carrying amount of financial assets recorded in the financial statements, net of any allowances for losses, represents the Group's maximum exposure to credit risk without taking account of the value of any collateral obtained. At the balance sheet date, there were no significant credit risks. The maximum exposure to credit risk at the balance sheet date was £33.3 million being the total of the carrying amount of financial assets, excluding equity investments as shown in the table below:

 

	2009  £m	2008  £m
Cash and cash equivalents Trade receivables Other receivables	6.9  18.6 7.8	10.2  2.6  7.5
	33.3	20.3
The ageing of trade receivables at the balance sheet date was:
	2009	2008
	£m	£m
Not due	7.7	1.5
Past due 0-30 days	3.4	0.6
Past due 3 1-60 days	2.1	0.3
More than 60 days past due	5.4	0.2
	18.6	2.6

 

The movement on the provision for doubtful debts is disclosed in note 21. The provision at the year end of £0.3 million (2008: £0.1million) relates to and is included within trade receivables more than 60 days past due. Other amounts past due are considered collectible based on prior experience.

 

The maximum exposure to credit risk for trade receivables by geographic region was:	2009 £m	2008 £m
West Africa	8.4	0.9
Southern Africa	9.2	0.8
East Africa	1.0	0.9
	18.6	2.6
The maximum exposure to credit risk for trade receivables at the balance sheet date by type of counterparty:
	2009	2008
	£m	£m
Wholesale customers	18.6	2.6

 

Liquidity risk management

Ultimate responsibility for liquidity risk management rests with the Board of Directors, which has built an appropriate liquidity risk management framework for the management of the Group's and Company's short, medium and long term funding and liquidity management requirements. The Group and Company manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities.

The following are the contractual maturities of financial liabilities, including estimated interest payments and excluding the effect of netting agreements:

	Carrying amount £m	Contractual cash flows £m	2009 1 year or less £m	1 to £m	2 to £m	5years and over £m
Bank overdrafts	0.9	0.9	0.9	-	-	-
Trade and other payables	36.5	36.5	36.5	-	-	-
Bank loans	6.4	6.9	1.3	1.4	4.2	-
Finance leases	1.3	1.5	0.3	0.3	0.9	-
Shareholder loans	7.6	12.1	0.9	0.9	2.7	7.6
Convertible loan note	0.3	0.3	0.3	-	-	-
Other loans	2.8	3.4	0.3	3.1
	55.8	61.6	40.5	5.7	7.8	7.6

2008

	Carrying amount £m	Contractual cash flows £m	1 year or less £m	1 to £m	2 to £m	5years and over £m
Bank overdrafts	0.4	0.5	0.5	-	-	-
Trade and other payables	13.8	13.8	13.8	-	-	-
Bank loans	3.0	3.4	3.4	-	-	-
Finance leases	1.3	1.5	0.3	0.3	0.9	-
Shareholder loans	0.3	0.3	-	-	-	0.3
Convertible loans	0.3	0.3	0.3
	19.1	19.8	18.3	0.3	0.9	0.3

 

In respect of income-earning financial assets and interest-bearing financial liabilities, the following table indicates their effective interest rates at the balance sheet date and the periods in which they re-price.

 

 

2009

Cash and cash equivalents	1%	6.9	6.9	- -	-
Loans	12%	(16.5)	(1.2)	(2.8) (5.2)	(7.3)
Convertible loan note	8%	(0.3)	(0.3)	- -	-
Finance lease liabilities	9.9%	(1.3)	-	(1.3) -	-
Bank overdrafts	12%	(0.9)	(0.9)	- -	-
		(12.1)	4.5	(4.1) (5.2)	(7.3)

 

 

2008

Effective

interest 1 year 1-2 2-5 5 years

 rate Total or less years years and over

% £m £m £m £m £m

Cash and cash equivalents	5%	10.2	10.2	- -	-
Loans	12%	(3.0)	-	- (3.0)	-
Convertible loan note	8%	(0.3)	-	- -	(0.3)
Finance lease liabilities	9.9%	(1.3)	-	- (1.3)	-
Bank overdrafts	12%	(0.4)	(0.4)	- -	-
		5.2	9.8	- (4.3)	(0.3)

 

Cash and cash equivalents

Included in cash equivalents is an amount of £2.8 million which is subject to restrictions on movement as it relates to a performance bond.

 

Foreign currency risk management

The Group is exposed to foreign currency risk on sales, purchases and borrowings that are denominated in a currency other than the pounds sterling. The currencies giving rise to this risk are primarily, US Dollars, South African Rand, Mozambique Metical, Kenyan Shilling, Central African Franc and the Euro.

 

The carrying amount of the Group's foreign currency denominated monetary assets and monetary liabilities, and its total net assets at the reporting date is as follows:

		Monetary net assets 2009 2008 £m £m						Total assets 2009 2008 £m £m
U.S.Dollar		(13.8)		0.3		50.5				39.9
South African Rand		(7.7)		-		12.3				2.1
Mozambique Metical		1.0		0.8		14.0				13.0
Kenyan Shillings		-		(0.3)		-				2.5
Central African Franc		(5.4)		(3.8)		(5.4)				(3.8)
Euro		-		0.1		-				0.1
		(25.9)		(2.9)		71.4				53.8
The following significant exchange rates applied during the year:
	2009		Average Rate 2008				Closing rate2009 2008
US Dollar	1.55		1.97				1.60		1.78
Euro	1.15		1.31				1.09		1.27
South African Rand	13.99		14.65				12.12		14.76
Mozambique Metical	40.35		47.54				46.36		43.23
Kenyan Shilling	125.11		130.92				124.99		130.43
Central African Franc	766.20		858.08				717.73		832.39

 

The Company does not have any exposure to foreign currencies at the reporting date (2008: £nil).

 

Foreign currency sensitivity analysis

A 10% strengthening of the UK sterling against the following currencies at 30 September would have increased/(decreased) equity and profit or loss by the amounts shown below. This analysis assumes that all other variables remain constant. The analysis is performed on the same basis for 2008.

2009 2008

Equity Profit/(loss) Equity Profit/(loss)

£m £m £m £m

US Dollar	(3.3)	(1.0)	(3.5)	1.1
Mozambique Metical	(0.8)	0.1	(1.2)	(0.1)
South African Rand	(0.6)	0.1	-	-

 

A 10% weakening of UK sterling against the above currencies at 30 September would have had the equal but opposite effect on the above currencies to the amounts shown above, on the basis that all other variables remain constant.

Interest rate risk management

The Company and the Group are not significantly exposed to interest rate risk as entities in the Group have limited borrowings. The only major loan carries a fixed interest rate as detailed in note 24. The Company and the Group's exposures to interest rates on financial assets and financial liabilities are detailed in the liquidity risk management section of this note.

Capital management

The Board's policy for the Group and Company is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. The Board of Directors monitors the return on capital, which the Group defines as net operating income divided by total shareholders' equity, excluding minority interests.

As the Group is in a phase of expansion, the key capital requirements are to ensure that funding is available for current and planned projects. To date this has been achieved through capital raises. Given the current economic climate, the Directors have instigated a number of other initiatives to ensure sufficient funds are in place (see note 35).

Fair values

The fair values are not materially different to the carrying amounts shown in the balance sheet in the current and proceeding year. The following summarises the major methods and assumptions used in estimating the fair values of financial instruments.

(a) Interest-bearing loans and borrowings

Fair value is calculated based on discounted expected future principal and interest cash flows.

(b) Finance lease liabilities

The fair value is estimated as the present value of future cash flows, discounted at market interest rates for homogeneous lease agreements. The estimated fair values reflect change in interest rates.

(c) Trade and other receivables/payables

For receivables/payables with a remaining life of less than one year, the notional amount is deemed to reflect the fair value. All other receivables/payables are discounted to determine the fair value.

30 Operating leases

At the balance sheet date, the Group had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:

Property Shipping* Total

		2009	2008	2009	2008	2009	2008
		£m	£m	£m	£m	£m	£m

 

Less than one year	0.4	0.3 -	14.0	0.4	14.3
Between one and five years	1.4	0.2 -	0.6	1.2	0.8
	1.8	0.5 -	14.6	1.6	15.1

* Relates to SAILS which has been classified as a discontinued operation (see note 9).

Included in the above, are property leases of the Company amounting to £0.3 million (2008: £0.2 million) less than 1 year.

 

31 Capital commitments

The Group has long term capital commitments in respect of an order for ten ATR aircraft. The total purchase price for the ten aircraft is capped at US$181.9 million (£112 million). The deposits for the first two (2008 four) of these aircraft of US$7.9 million (£4.9 million) have been paid and are included within other receivables (note 21). The timing of the delivery and finance for the first two aircraft is being negotiated. An Export Credit Agency Promise of Guarantee has been issued by Coface for 80% of the financing of the initial four aircraft.

The above commitments are contingent on the successful arrangement of commercial finance which will be arranged by ATR. Other capital commitments of £1.2 million will be paid within the next financial year (2009 £1.1million).

The Company had no capital commitments at 30 September 2009 (2008: £nil). The Group's share of capital commitments of joint ventures is £4.5 million (2008: £Nil)

32 Contingent liabilities

There were no contingent liabilities at the balance sheet date (2008: £nil), the outurn of which the Directors consider could materially impact the financial statements. The Group has no contractual obligation to provide future funding to joint ventures and has no contingent liabilities in respect of its joint ventures.

33 Related parties

The Group has a related party relationship with its subsidiaries (see note 34), associates and joint ventures (see note 17), companies in which the Group has an investment, and with its Directors.

Transactions with subsidiaries

Transactions within the Group companies have been eliminated on consolidation and are not disclosed in this note.

At the balance sheet date Lonrho Africa (Holdings) Limited owed the Company £55.8 million (2008 £45.3 million). Lonrho Africa (Holdings) Limited holds the operating bank accounts for the Group and the majority of the Group's investments. The movement on the intercompany balance represents the transfer of cash raised during the year through the capital raises.

Transactions with associates

LonZim Plc

At the balance sheet date, the Company owned 27.87% of LonZim Plc and exerts significant influence over the company. On admission to AIM in 2007 LonZim Plc issued shares to the value of £7.3 million in exchange for Lonrho Plc entering into a non-compete agreement. The agreement covers a period of five and a half years from November 2007.

 

Between 5 February 2009 to 11 February 2009 Lonrho Plc acquired a further 1,650,000 ordinary shares of £0.0001 each in LonZim Plc, taking its total interest to 8,940,000 ordinary shares, which represented an approximate 24.53 per cent. holding in LonZim's total issued share capital at that time. The reduction in the overall interest reflects the impact of a share issue by LonZim in December 2009 in which the Group did not participate.

During the period the Company charged £0.4 million (2008 £0.2million) to LonZim Plc as a management charge. At the balance sheet date £Nil was due from LonZim Plc (2008 £0.2million).

 

During the year Lonzim acquired 59,682,817 shares in Lonrho Plc at a weighted average cost of 5p per share. At the year end LonZim Plc held 17,182,817 shares in Lonrho Plc. These were sold over the period to December 2009.

 

On 1 July 2009 Lonzim acquired an aircraft from Lonrho Air Three (BVI) Limited, a subsidiary of Lonrho Plc, for a total of US$4.3million (£2.6million). The aircraft is leased to Five Forty Aviation Limited, a Lonrho subsidiary, for US$55k (£35k) per month. The total lease income for the year to 30 September 2009 amounted to US$0.1million (£0.1million).

 

 

Investments

 

On 1 October 2008 Lonzim leased two aircraft to 540 (Uganda) Limited, a Lonrho subsidiary, for US$50k (£31k) per month. The total lease expense for the year to 30 September 2009 amounted to US$0.6million (£0.4million).

 

From 1 January 2009 ForgetMeNot Africa Limited, a 51% subsidiary of LonZim Plc, leased office space from Lonrho Plc for £2k per month. The total amount for the year amounted to £18k.

 

On 16 December 2008 Lonrho Africa (Holdings Limited) transferred the entire share capital of Lonrho Africa Property (Holdings) Limited to LonZim Holdings Limited for £1 consideration. Lonrho Africa Property (Holdings) Limited then changed its name to LonZim Enterprises Limited.

 

At the balance sheet date £Nil (2008: £42k) was due to LonZim Plc.

 

Lonrho Mining Limited

During the year the Group increased its stake in Lonrho Mining Limited from 24.16% to 25.32% at a cost of £0.5 million. At the balance sheet date £0.1 million was due from Lonrho Mining Limited (2008: £0.1million) which arose from a short term, non-interest bearing loan.

Swissta RDC SpRL

The Group holds 20.0% of Swissta RDC SpRL (see note 18). At the balance sheet date £0.1 million (2008: £0.1 million) was due from Swissta RDC SpRL as a result of a short term non-interest bearing loan.

Transactions with key management personnel

Key management personnel are considered to be the Company's Directors. Their remuneration is disclosed in notes 26 and 10.

During the year £0.1 million (2008 £0.3 million) was charged to the Group by DSG Chartered Accountants. Jean Ellis is a partner in this firm.

34 Group entitiesSignificant subsidiaries

	Country of incorporation	Ownership interest2009 2008
Luba Freeport Limited	Jersey	63%	63%
FiveForty Aviation Limited	Kenya	49%	49%
Lonrho Air (BVI) Limited	British Virgin Islands	100%	100%
SA Independent Liner Services Pty Limited + +	South Africa	-	66.7%
Sociedade Comercial Bytes & Pieces Limitada	Mozambique	65%	65%
Complete Enterprise Solutions Limited	Mauritius	50%	50%
Complete Enterprise Solutions South Africa (Proprietary) Limited	South Africa	40%	40%
Indit Technology Distribution (Proprietary) Limited	South Africa	45%	45%
Swissta Holdings Limited	Mauritius	100%	100%
Swissta Mozambique Lda	Mozambique	100%	100%
Hotel Cardoso SARL	Mozambique	59.04%	59.04%
KwikBuild Corporation Limited	Isle of Man	61.97%	61.97%
Lonrho Africa (Holdings) Limited+	UK	100%	100%
Rollex (Pty) Limited	South Africa	51%	-
E-Kwikbuild (Pty) Limited	South Africa	32%	31%

 

+ Directly held by the Company.

++ SA Independent Liner Services Pty Limited was put into liquidation on 15 October 2008.

Inclusion of all the subsidiaries in the Group would be excessive and therefore only the significant trading entities are shown above.

Although the Group owns less than half of the voting power of FiveForty Aviation Limited, it is able to govern the financial and operating policies of that company by virtue of an agreement with the other investors of FiveForty Aviation Limited. Consequently, the Group consolidates its investment in the company.

Similarly for Complete Enterprise Solutions South Africa (Proprietary) Limited and Indit Technology Distribution (Proprietary) Limited, and E-Kwikbuild (Pty) Limited (see note 17), the Group has Board control giving it the ability to govern the financial and operating policies of the companies and hence the Group consolidates its investment in these companies. Exchange control procedures exist in Kenya, Mozambique and South Africa which place restrictions on repatriation of cash to the Group.

 

35 Events after the balance sheet date

In December 2009:

On 4 December the Company issued 160,257,213 0rdinary shares via a placing at 10p per share raising £16.02 million before issue costs. The total amount of shares in issue following the placing was 959,353,712.

 

On 21 December the Company increased its holding in Kwikbuild Corporation Limited to 70%. The Company paid consideration of £333,333 to increase its equity by 8% of the business and to acquire an historic shareholder loan which in due course will be converted to equity.

 

On 30 December the Company issued 90,925,000 ordinary shares at 10p raising £9.1 million before issue costs. The total number of shares in issue following the placing was 1,050,278,712.

 

In February 2010:

On 18 February 2010 the Company announced that it had signed a formal Heads of Agreement to acquire 100% of Trak-Auto Lda, (Trak-Auto) the existing holder of the John Deere and Komatsu dealerships in Mozambique. John Deere is a leading supplier of agricultural equipment and Komatsu is one of the world's largest manufacturers of construction, mining and utility equipment. The acquisition price is US$2 million (£1.2 million) and deferred payments of US$1 million (£0.66 million) per year over three years.